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.

Fool contributor Dan Caplinger owns shares of iShares Russell 2000 ETF. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.