It's a difficult choice, to say the least. Choosing between actively managed funds and passively managed funds (like the index funds and ETFs) brings out a debate between supporters of both the sides.

Travis has some thoughts on the issue that you can find useful. Excerpts:

It is hard to know what counts as appropriate advice in recommending DIY investing or managed funds. The fact is that most managed funds are beaten by index trackers because index funds cost less, so many investors think they can profit from cutting out the MERs of even index funds and buying stocks directly.

The unfortunate reality is, the majority of amateur investors do even worse than managed funds. They trade far too much, and a surge in frivolous trading encouraged by Internet stock brokers has increased the degree of underperformance since the days of phone service brokers.

Today's markets are semi-efficient in that most stocks are fairly priced and therefore you need to work hard to find something that is genuinely undervalued, on the other hand the best opportunities are often in smaller companies that most major fund managers won't touch. Many amateurs think "checking out the PER, and making sure they don't have too much debt" (whatever that means) is sufficient fundamental analysis, but as an even larger number of amateurs use technical analysis in various degrees you can probably understand why amateurs as a group do so badly.

I have read numerous articles from various people stating that small single investors beat managed funds, but none of these articles carried a great lot of evidence, it seems that most people just assume small investors beat the index because managed funds are expensive and most of them don't beat the indexes. "Professional investors fail, so the way to go must be amateur investing." That's pretty specious reasoning if you ask me!

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