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Indexing Extremists

It's time for the leaders of the index movement to step up and reclaim the intellectual honesty that their early supporters advocated, says Morningstar's president of fund research Don Phillips.

In the 1980s and 1990s, the index community was the voice of reason in the investment debate. Today, however, credible voices within the index community are too often drowned out by a vocal fringe that does more to polarize than to advance the investment discussion.

Early index adopters correctly pointed out that not all managers can be above average, that costs and taxes matter, and that a long-term strategic view is more conducive to investor success than is short-term trading. They asserted, correctly, that indexing is an assured way to get an above-average long-term result after considering costs and taxes.

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