Index investing has clear benefits: lower fees and less fund switching. Index investing has an inherent flaw. To track the index as closely as possible, index funds have no flexibility on what stocks to buy/sell or how much or when to buy/sell them. Index funds must take whatever price is required to get the exact shares they need, exactly when they need them. This mandate raises the cost basis and lowers the long-term returns of index funds and the indices themselves. Given their recent dominance in fund flows, index funds may prove vulnerable in down markets. A better approach draws on the best aspects of active and index investing—evidence-based investing which is disciplined, systematic, low cost.