Investors who do not have an advisor and feel they are not competent enough to select an active fund by themselves may want to invest in an index fund. With outperformance within the large-cap space shrinking, many investors are now turning to index funds
for their large-cap allocation.
Use two criteria for selecting an index fund. One is expense ratio, which is the annual charge the fund house levies. The lower the better. Another criterion you should use is tracking error. This number shows how closely an index fund is able to replicate the performance of its index. Here again lower is better.