Rex A. Sinquefield is Co-Chairman of Dimensional Fund Advisors Inc. Over twenty years ago, Sinquefield and Roger G. Ibbotson were the first to compile and present in an organized way historical investment data which has come to be widely used in the investment world. DFA is a worldwide leader in the practical application of academic theories to the management of asset class index funds. DFA manages more than $20 billion for over one hundred institutional investors.

Sinquefield describes the strong theoretical support for indexing. "A large volume of academic studies examining the performances of mutual funds under actual market conditions establishes very convincingly that the 'beat the market' efforts of investors who pick stocks and time markets are impressively and overwhelmingly negative. In contrast, indexing stands on solid theoretical grounds, has enormous empirical support and works very well for investors. The message ofindexing is thereforeunmistakably obvious: the only consistent superior performer is the market itself and the only way to capture that superior consistency is to invest in a properly diversified portfolio of index funds."

Paul A. Samuelson became the first American to win the Nobel Prize in Economic Science in 1970 and is one ofthe most influential economists ofthe twentieth century. He concisely summarizes the case for indexing. "The most efficient way to diversify a stock portfolio is with a low fee index fund. Statistically, a broadly based stock index fund will outperform most actively-managed equity portfolios. Hardly ten of one thousand [money managers who pick stocks and time markets] perform in a way that convinces a jury of experts that a long term edge over indexing is likely."

Jane Bryant Quinn is the Newsweek financial affairs columnist and best-selling author of Making The Most of Your Money. She describes the problems faced by investors when they attempt to pick active mutual fund winners and how investing in index funds can avoid these problems: "Indexing is for winners only. Let's see why this is true. Every month in the personal finance magazines you are seduced by the promise of Funds To Buy Now! The truth about funds on the Top Ten lists is that most of them will not do as well as the major market indexes such as the S&P 500.

"Their highly paid managers face two almost insuperable tasks. They have to pick stocks that go up in price by more than other investors expect - which usually is not possible in a world where so many players know so much. They also have to cover their costs: say, 1.5 per cent in annual expenses and for some funds, sales loads. On the other hand index mutual funds are easy, inexpensive, save taxes and help investors diversify. In this light, it's not hard to understand that some of the most successful investments such as index funds often are the simple ones."
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