Index fund works well because it's diluted. When you invest in a single company there are many unknowns and downsides but stretched across the sector, you find

Index fund works well because it's diluted. When you invest in a single company there are many unknowns and downsides but stretched across the sector, you find less risk (how likely is it that other than Toshiba and Kodak are cooking books). However, the returns are also limited to the sector as well. I admit picking undervalued companies AND being solvent enough before the market reacts rationally is a huge undertaking and why there's so little of successful value investors.