Jazzing Up Those Index Funds

Yesterday I made the case for index funds — stock-market mutual funds that typically outdo most others because they typically have no sales fees, very low expenses and (yesterday’s point) high “tax efficiency.” They don’t sell often, so they incur relatively few taxable gains.

The problem is they’re boring. No chance of bonanza, just your plodding old 34% annual return. (Well, last year may not have been typical.)

So here’s my plan. Vanguard and the rest should offer an “index-plus” fund. It would invest 99% of your money just as now. The remaining 1% — still millions of dollars — would be put toward a lottery, like the Publishers Clearinghouse Sweepstakes. You probably wouldn’t win, but you could dream.

Tomorrow: Retailers as Showrooms