Yeah. Um... I am still really new at investing, so I may be way off base, but the following is my opinion and someone else more knowledgeable correct me if I'm wrong.
Your friend is ignoring expense ratios for one thing. Right off the bat, the funds you listed range from 0.82%-1.37%. Which is HIGH and eat up the investing amounts. And just from a quick look on one of them to compare the 5 year returns, Vanguard's total stock index outperformed... meaning that he paid more to earn less.
There was a vid posted within the last few months from Frontline (sorry can't find the original post to credit the poster):
http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/It's a great story - but the thing that is pertinent to this discussion is the interview with Jack Bogle that starts at about 23:40.
From the video: "Bogle says you've lost almost 2/3 of what you would have" if you're paying something like 2% fees. So even if index investing
might trail some of the high flyers every once in a while, if you're consistently paying high fees for basically the same returns +/- a percentage point or two... you're still doing worse than if you just used index funds from the start.
And I agree with warfreak2 on the gold thing.
If your friend sold off his other funds AFTER the 2008 crash, that means he locked in the money lost getting out of funds (selling low) that would have recovered to stick them into the gold. I don't think that was a smart move.
And then when it comes down to it, how much time and effort and worry do you want to devote to your portfolio? I think index investing bothers folks in general because it
is so easy, they think that it either has some sort of a catch to it. Or else if it is THAT easy, then they of course could get better returns just by investing more time and effort into their portfolio.
A few great posts by Jim Collins, who could say it much better than I can...
http://jlcollinsnh.com/2012/01/06/index-funds/http://jlcollinsnh.com/2013/02/05/stocks-part-xv-index-funds-are-really-just-for-lazy-people-right/http://jlcollinsnh.com/2011/06/02/why-i-cant-pick-winning-stocks-and-you-cant-either/