"Anybody who has an investment idea fabricates an index," declares Gigi Turbow Marx. The founder of Old Field Advisors in Melville, N.Y., is exaggerating only slightly. After all, the major providers calculate hundreds of thousands of indexes daily and indexing is attracting an increasing percentage of investment assets. One reason is the growing popularity of exchange-traded funds, including in 401(k) plans; a vast majority of ETFs are index-based.

This popularity is feeding on itself. “A lot of people just want to do the popular thing,” observes planner A. Raymond Benton of Denver-based Benton & Co. “I think investors as a group are very much the victims of recency bias.”

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