Now, that can conceivably be justified -- if you have an adviser who's getting you an extra 5 percent return, then letting the guy take one percent or so isn't necessarily a bad deal. But are they? Quoth Michael Lewis:
- In his just-published book, ``A Random Walk Guide to Investing,'' Burton Malkiel shows that over the past two decades index funds have outperformed 88 percent of managed funds. That is, investors paid the vast majority of mutual-fund managers to grow their capital more slowly than if they had simply invested it in market indexes.
More narrowly, in the past five years, while mutual-fund investments were growing to $7 trillion from $5.3 trillion, the Standard & Poor's 500 Index has outperformed 53.4 percent of large-cap equity funds.
There is no need to enter into an argument about market efficiency to win an argument about the idiocy of investing in mutual funds. No matter how you slice the numbers, you wind up with the same conclusion: the mutual-fund industry has been lucrative mainly for the people who work for mutual funds.
So, if you're investing in equity funds at all, buy an index fund. The cheapest you can get...