1) Management fees. A fund will usually get ~1% as a management fee. That means that if their allocation strategy gives return of 5%, you will see a return of 4

1) Management fees. A fund will usually get ~1% as a management fee. That means that if their allocation strategy gives return of 5%, you will see a return of 4%. Index funds have really low fees (<0.2%) so they don't have to perform as much as an actively managed fund to give better returns. You can think of it as moving your average return up by 0.8%, that's very significant, especially when you consider that on average funds don't beat the market. 2) Correct, the article is either written by someone with a lot of time to pick stock and do due diligences or someone who convinced himself that their "gut feel" can beat the market. Either way historically those takes are not great. EDIT: One thing I didn't add. Funds still have a good reason to exist, and that is risk management. Not all financial products want to replicate the SP500 index. You don't want your retirement fund to drop ~25% during a pandemic. That's where funds will shine. They can get you the right mix of bonds, banks and natural resources to stabilize your portfolio to +-4% every year. Some index funds do offer something similar (XCNS, XBAL) but it can still be worth having something actively managed.