Over the long term, stocks have historically outperformed all other investments. From 1926 to 2001, the stock market returned an average annual 10.7 percent gain. The next best performing asset class, bonds, returned 5.3 percent. Over the short term, stocks can be hazardous to your financial health. If you thought the Dow's 554-point drop on Oct. 28, 1997 was rough, consider the 508-point drop 10 years earlier, on Oct. 19, 1987. The 1997 decline was a mere 7.2 percent, while the 1987 crash -- the worst one-day …showed first 75 words of 720 total…

…showed last 75 words of 720 total…funds often outperform actively managed funds. In an index fund, the manager sets up his portfolio to mirror a market index -- such as Standard & Poor's 500-stock index -- rather than actively picking which stocks to purchase. And average is often enough to beat the majority of competitors among actively managed funds. One reason: Few actively managed funds can consistently outperform the market by enough to cover the cost of their generally higher trading fees.