SP 500 index

The S&P 500 is a bellwether for the American economy, and with quarterly reports for more than half of the index's companies in this earnings season, S&P 500 firms are averaging a 4.5% positive earnings per share surprise, according to Capital IQ's Earnings This Week report.

Here's a short answer for those who wonder what could transport the market still higher: the economy. The unexpected and sudden advance that started last September foresaw favorable economic news. The continuing rebound will now propel the market to even headier levels.

That's the average prediction for 11 analysts polled by Bloomberg News. Goldman Sachs's David Kostin, Bloomberg's most accurate U.S. strategist this year, is even more bullish. He says sales growth will spur a 17% rally in the S&P 500 through the end of 2011.

You would think that an S&P 500 Index fund would be one of the easiest investments to own. But it turns out that choosing from among the many mutual funds that track the performance of stocks in the broader market is fraught with risks. In theory, of course, picking an index fund should be...