Index Fund Investing:

Over the past 50 years, the S&P 500, an index of 500 of the biggest companies in the U.S., has risen an average of 13.6% annually (dividends reinvested). If you invested $10,000 into the S&P 500 50 years ago, you'd have $5.78 million in your account today. After taxes of $1.62 million, you'd have $4.16 million left over for your diapers.

Trouble is -- most people who have invested in regular mutual funds haven't come close to 13.6% -- unless they invested in an index fund. According to Princeton University, the average managed mutual fund has returned 1.8% per year less than the S&P 500. Interestingly, this 1.8% is just about the average expense ratio of actively managed funds. 1.8% per year may not seem like very much, but it is in the long run.

That tasty 5.78 million bucks you would have had at 13.6% would be roughly half as much with the 1.8% management fees dragging your feet.

Even worse, you'd have to pay bunches and bunches of taxes every year because of that monkey over there at the mutual fund day trading your investment. According to the Investment Company Institute, the average turnover for actively managed funds is above 40%. Turnover can run as high as 90% in some of these operations...even the good ones. That means that over the course of the year, that manager would have traded 90% of the stocks held by the mutual fund forcing you to pay capital gains taxes every year...even if your monkey boy loses money.

The lower the turnover, the lower your tax bill. Index funds generally have turnover of less than 5% per year. But, even if you are picking a mutual fund for your tax-deferred 401(k) or 403(b) plans, or for an IRA, if there is an index fund available in your list of choices, a common sense thing to do would be to make it one of your only investments.

Historically there has never been a 10 year period in the entire history of the stock market where the S&P lost money. If that's not comforting, monkey managers can't help you either.