A. Not all index funds are created equal.
While on average index funds are a lot cheaper than actively managed funds, for example, index mutual funds' average annual expense ratio is 0.67%, indexed exchange-traded funds' average annual expense ratio is 0.36%, and actively managed funds' average annual expense ratio is 1.22%, there are expensive index funds and low cost actively managed funds.
Costly Index Funds
Here are a few examples: Rydex S&P 500 Fund, an index mutual fund that priced twice daily, has annual expense ratio 1.58%! Green Century Equity Fund, an index mutual fund that invests in MSCI index, has annual expense ratio 1.25%. Victory CEMP US 500 Enhanced Volatility Weighted Index Fund has expense ratio around 1%.
Inexpensive Actively Managed Funds
Here are some examples: Vanguard Equity Income Fund, it typically invests in U.S. companies that consistently pay dividends, has annual expense ratio of 0.26% (0.17% if you invest $50,000 or more in the fund). Vanguard U.S. Value Fund, annual expense ratio 0.26%; Vanguard Strategic Equity Fund, annual expense ratio 0.21%; Dodge & Cox Stock Fund (invests in large cap stocks that appear to be undervalued) has annual expense ratio of 0.52%.