In mythology, the Sirens were beautiful yet dangerous creatures. They lured sailors to their doom with their enchanting music and voices – causing them to wreck their ships on the nearby rocky coast.

Fast forward to today, and investors are facing similar circumstances to those sailors of long ago. Only now it’s the siren call of index funds that threatens to “shipwreck” investor portfolios in the current rocky investment climate.

A climate – I might add – that my 30 years’ experience in the investment business, tells me will continue for a very long time.

Why?

Because central bankers “magic” seems to be losing its “mojo.”

Close Your Ears to Bogle’s Call

Investors today are bombarded with siren calls of how passive investing – index funds – is the way to go. Just put your investment plan on autopilot and you’ll end up well off in retirement.

The loudest of these voices is John Bogle, the Chairman of Vanguard – which he founded in 1974.

But that’s to be expected. In Wall Street parlance, he is “talking his book.” His business, with about $3 billion under management, relies mainly on index funds for its existence.

Today, more than $1 in every $5 invested is in index funds. And Bogle wants all five of those invested dollars to be invested with Vanguard.

He continuously forecasts the demise of active stock-picking funds.

And Bogle certainly has the performance data on index funds to back him up over the past decade. In the 10 years through 2014, Morningstar says passive funds outperformed active funds with returns of 9.27% versus 8.05%.

But investors need to realize that the recently ended period is one that probably won’t be repeated. Ever.

Markets came to believe in the omniscience of central bankers. Stocks, particularly larger ones, all floated higher on the flood of liquidity from the fed and other central banks. Trying to swim against that tide and outperforming by picking individual equities was like spitting into the wind.