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Along For The Ride

On the stock market highway, index funds put your money on cruise control.

This story appears in the November 1998 issue of Entrepreneur. Subscribe »

To index or not to index? In the financial markets of the '90s (the recent market correction notwithstanding), where some investors seem to think that double-digit returns are a right, many question not whether they should invest in an index fund but whether to invest in anything else.

In search of the highest returns, fans of index funds would point out that figures don't lie: According to statistics generated by Kevin McDevitt, mutual fund analyst at Morningstar Inc., for the past three years, the S&P 500 Index landed in the top 7 percent of all large-company funds; for the past five years, the top 7 percent; for the past 10 years, the top 13 percent; and for the past 15 years, the top 8 percent. Although past performance is no indication of future returns, don't think investors haven't noticed the results: Over the past five years, they've poured billions of dollars into index funds.

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