An index fund fundamentalist - Goes back to the drawing board.

This article revisits the author's 1998 study, which showed the superiority of low-cost equity funds over their high-cost alternatives for the five years ending 1996. Updating through 2001, the author again demonstrates that low-cost funds outperform high-cost funds on both an absolute and a risk-adjusted basis, and by an even greater margin than the cost differential would suggest. This pattern persists for equity mutual funds as a group, and in each of the nine Morningstar style boxes. Following this logic, as typically the lowest-cost alternatives in their category, index Funds would be expected to rank among the top-performing funds in a category. As in his 1998 article, the author finds this is true index funds outperform their actively managed counterparts in eight of the nine style boxes.