Why invest in index funds over mutual funds? Could mutual funds beat the market in the long run? Only a tiny fraction of actively managed mutual funds will outperform index funds in the long run. This is because financial assets tend to converge to the average price over time—a statistical tendency called “reversion to the mean.” Here’s what reversion to the mean means for mutual fund investors.
Why Invest in Index Funds? They Outperform Mutual Funds
