I can think of 14 reasons to prefer index funds over managed funds:
1. Low cost
research has shown that "low-cost" is the best predictor of future returns. Index funds have much lower costs than most managed funds.
2. Higher returns
: Index funds (on average) have higher returns than managed funds as this Standard & Poor's Study
The increased diversification of index funds results in lower risk. Baer & Ginsler did a study of Standard Deviation for actively managed funds vs. the total stock market over both 5- and 10-year periods. Their conclusion: "The returns of actively managed funds were 20 to 25% more volatile than the broad market."
: Only once in the past 15-years did Vanguard's Total Stock Market Index Fund
fall below its large-blend category average. As a result it is in the top 29% of all large-blend funds before tax, and the top 20% after tax.
Of 355 actively managed equity mutual funds around in 1974, less than half survive today. Indexers do not have to worry that their fund will disappear.
6. No style drift
: We know that asset allocation determines about 90% of portfolio performance. Managed fund allocations often change.
7. No overlap:
It is almost inevitable that a portfolio of managed funds will have overlap. This is not a problem with index funds.
8. No manager changes:
History tells us that the average manager leaves within five years. Index fund investors do not worry about manager changes.
9. No asset bloat
which often causes large successful funds to under-perform (Magellan, Legg Mason Value Trust
10. Less cash dilution.
Index funds hold less cash than active funds.
No worry that a manager has "lost his touch."
: Index funds are significantly more tax-efficient than most managed funds. It is after-tax return that counts.
13. Low maintenance:
Index funds are simple, predictable, and easy to understand, explain, and maintain.
14. Peace of mind:
Indexers know the averages are always working for them. The index investor has much less worry and more free time to spend with family and other more enjoyable endeavors.