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An actively managed mutual fund is where you pay a smart guy an annual fee to pick and choose stocks for you. Studies show they charge high fees but consistently lose to the market after their fee is taken out.
An index fund is owning the full market at a very low cost and thus closely match the performance of the market.
According to Morningstar, over the last five years actively managed mutual funds trading large US stocks have provided an average annual return of 9.6%. But an S&P 500 index fund has returned 11.3% over the same period. That means actively managed mutual funds have underperformed the index fund by 1.7% per year. If you extrapolate that over the course of a 40 year career, you get the devastating results you see in this example.
Log in to your investing accounts and take a look at what you're invested in. Check the "loads" and "expense ratios". If your loads are more than zero or your expense ratios are more than 0.5% (index funds are usually more like 0.1%) you are very likely to perform more like Danielle in this example.
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