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To: Joan Osland Graffius who wrote (172425)	6/13/2002 9:29:01 AM
From: Knighty Tin	Respond to of 436258

Morningstar backing off a bit on S&P 500 index funds. news.morningstar.com I don't like indexing, in general. However, the S&P 500 index makes a bit more sense than most. These are giant, large crap stocks with tons of street sponsorship. It is extremely difficult for active fund managers in the large crap area to consistently beat it, partially because it is only 500 stocks and most are too wimpy to move away from that universe in any significant way. For example, I recently heard a group of large crap portfolio managers claim that their funds were down because they owned overpriced stocks. They "had" to own them if they didn't want to be accused of "drifting" from the index. What a bunch of horse droppings. Net, net, if you are going to closet index a fund, the investor is likely to be better off in the lower fee index or I-shares, over time. Other indices don't work as well in this regard. Every small cap manager I know beats the Russell 2000 like a bass drum over the long haul. Ditto for the mid-cap. The Intl. indices are blown away by the active managers. Why? Too much diversity within the indices, so managers can dare to manage. BTW, the Lehman Bond indices are tough competition for active managers. Bonds have less to differentiate themselves than stocks. Once mgt. costs are taken into account, and friction costs, the indices are pretty rugged. I look forward to seeing the cost structure of the coming bond I-shares.