Please just remember how this low cost, broad market index will (
inevitably) achieve it's outperformance over the vast majority of actively managed funds (think time horizon in decades, not years):
- it is almost 100% stocks all the time (most mutual funds may have something like 5 - 10% cash position to cover redemptions and as dry power), and something like 92% of long-term perfomance can be explained (correlated) with
strategic asset allocation stocks >> bonds > cash
- active money manager has expense ratio to overcome, plus hidden portfolio trading costs. This can easily add up to
2 - 3% or more headwind in terms of
average annual return. Actively managed fund that has big winner among it's top holdings can easily beat index over say 1, 3, 5, or possibly even 10 year periods, but that inevitable headwind means fewer and fewer funds will be able to beat the market by 3% a year as time passes. Sure there will be some fund that absolutely destroys index and most other funds, but that is not just skill, there is an element of luck in terms of having great winner in large position stock or avoiding really nasty loss despite best due diligence.
- there will be times, because of the index's broad diversification, where index fund will be badly, badly beaten by most actively managed funds (because they are more concentrated in winning sector or particular stocks). Doesn't mean index investing, or buy and hold investing in quality mutual funds, is dead, just that you have to step back and look at things from appropriate time frame.
Plus, if this is the equivalent of beginning of 1970s for stock market, hopefully you can feel comfortable buying VTSAX even in bleakest of times if your time horizon is decades off. There will be a bull market some time in future (e. g.
http://news.morningstar.com/article..._LPAGE=/FORBIDDEN/CONTENTARCHIVED.HTML&_BPA=N) and you are just collecting shares of something you should have confidence in (USA) that is presumably of high quality and won't go to zero, even if market is scary as heck at times.
Remember, as John Bogle likes to say, Stay The Course, Stay The Course.