At this point most people know the advantages that come with investing in index funds. They are tax efficient because of their low turnover. This lowers the transaction costs in the funds making them less expensive to manage. The expenses are extremely low compared to actively managed funds for these reasons. Vanguard’s equity index funds average a 0.20% expense ratio vs. 1.12% for actively managed funds. They guarantee to give you almost exactly the market’s return less the low fees you pay. Index funds are extremely diversified so you don’t have to worry about concentration risk of having all of your eggs in one basket. In 2011, 84% of all actively managed mutual funds got beat by a simple S&P 500 index fund. The long-term performance numbers of index funds are just as good. When measured against its large cap stock universe from Morningstar mutual fund research, over the last 3, 5, 7, and 10 years through the end of 2012 the S&P 500 has outperformed 75% of al