The year 2006 will be remembered as the time when indexing and the exchange traded funds (ETFs) that track them came through.  Looking back over the year, actively managed funds, bond funds and hedge funds have had a slow year, and just couldn’t beat the market.

On an opposite note, the Dow Jones Industrials broke the 12,000 point barrier. The S&P 500 and the Nasdaq 100 are also set to end the year on a high note. Through December 1, the Dow outperformed the year-to-date performance of every single Dow Jones hedge fund benchmark, reports Ronald L. DeLegge of ETF Guide. The S&P isn’t far behind as it has beaten 5 of 6 Dow hedge fund benchmarks.

So if, actively managed funds can’t beat their benchmarks, then wouldn’t an ETF make sense, when it mimics the index?

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.