2 Reasons Mutual Funds Perform So Badly

Actively managed mutual funds have attracted trillions of dollars in assets. Yet historically, their performance hasn't been able to stand up to a simple low-cost S&P 500 index fund, which has outperformed more than 80% of actively managed large-cap funds over the past 10 years.

In the following video, Fool contributor Dan Caplinger explains why so many actively managed mutual funds have failed to keep up with the market averages. After identifying two key sources of friction that hit overall returns, Dan concludes that investors seeking simplicity in their investing shouldn't shy away from index mutual funds and ETFs that offer broad-market exposure at minimal cost. Dan offers some ideas on appropriate investments in a number of different areas.

To learn more about a few ETFs that have great promise for delivering profits to shareholders, check out The Motley Fool's special free report "3 ETFs Set to Soar." Just click here to access it now.

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