You are absolutely right to avoid managed funds for the most part. Looking at SPY, annual fees are listed by Morningstar at .09% which is even lower than the .38% norm for the category. ETF's have somewhat lower management fees than the equivalent mutual fund because you have to typically pay a brokerage commission, so its not a bad idea to stick with ETF's. I do like many of the Vanguard index funds/ETF's but there are other good index choices.

Using an exception to compare or measure the rule is not a good plan.

If you're using 30% gains per year to measure this question and see into your future and form a plan, you are blinded by optimism.

If you use a more normal annual return of 8% - 12%, then you can see why people want to enhance paltry gains. Whether you should or not is an entirely different matter.

If you can find a fund that consistently beats the market, why wouldn't you pay 1% for that managed fund?

Who would you rather have sex with, a live person

or a robot? An activly managed fund manager can

move in and out quickly. In many cases its worth the

slightly higher cost. One of my best funds is Fidelity

Low Priced Stock Fund (FLPSX) which over the years

has done very well with a cost of less then 1% If you

do some research, you will find many good funds that

do better then index funds.

Why should I pay 1%-3% per year for an actively managed mutual fund when SPY, the S&P500 index ETF, returned about +32% in 2013. US Small cap index ETFs returned about +38%. Their fees are around 0.1% per year.