Combine index funds and actively-managed funds in order to get the best of both worlds. Index funds, pegged to duplicate an index such as the S&P 500, assure you of receiving the performance of the broad stock market at a relatively low management cost. The actively-managed funds give you a chance to beat the averages. To complement the index fund, select two or three actively-managed funds with good records. Try to find funds that won’t duplicate the index fund. For example, you might want one fund with a strong commitment to buying out-of-favor “value” stocks and another fund that looks for rapidly growing companies.