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Well, as you say, it has happened and it will happen again - the stock market will crash. But it is not the moon and for a really well educated investor such events can be sensed. There are signs that can help you predict an upcoming crash. Just think of names such as Charles Merrill - the first Wall Streeter to predict the Great Crash of 1929. He saved himself by liquidating his firm's stock portfolio before the crash came. So what any investor should do is study carefully the events that cause the stock market crashes in order to be able to avoid great losses. Here is a start: Top 10 Stock Market Crashes
I used to think that actively managed funds are worth the high fees if they bring you high enough returns. But lets face it - the reality is that the S&P 500 beats the returns of 80% of actively managed funds so how "lucky" do I have to be to get into those 20%, and how good those actively managed funds have to be to outperform index funds in terms of profit AFTER I pay the needed taxes and fees. Because index funds have not only lower fees, but also save you from taxes (due to the fact that index funds hold the stock longer than the other types of mutual funds) and thus generate higher returns by allowing you to invest those saved money. So for a buy-and-hold investors index funds are the right solution and if someone is still not convinced in that, that someone should read the article that convinced me: Index Fund Investing and pay attention to the "Arithmetic Element".
Toggle Commented Oct 2, 2007 on Time For Index Funds at Servant Financial News