I think index funds can be good if you don't know what else to do or how to analyze a managed fund.
However.....in markets like small cap, mid cap, and international, managed funds statistically perform much better as those markets are far less efficient and it's easier for fund managers to capitalize on those inefficiencies. For that reason alone, I would not consider index funds the best option for those areas.
Large cap can be a closer call performance-wise over the long term, but there are still plenty of good reasons to go with a managed fund in that market at well. For one thing, you can often get the same, if not slightly better performance with less risk.
The reason for this is that many indices, especially the S&P 500, tend to expose investors to unnecessary risk by overweighting certain sectors at inappropriate times. The perfect example of this is the .com boom and subsequent crash in 2000/2001. The sector weightings of the S&P 500 are determined by a committee, so it's not entirely "unmanaged" in a pure sense. By following their own directive to represent "the market" as a whole, they heavily increased their weightings in tech and .com stocks at the time those industries were peaking out, causing any investor in the S&P 500 to be overweighted in a sector that was bubbling and about to pop. The end result was that many index investors saw a substantial decline in value. Many managed funds had a substantial decline as well, but there were many that didn't.
Anyway, my point is that there is definitely added value in managed funds, you just have to be selective about which ones you pick. Some of the key factors to zero in on are picking managed funds that have a nice long track record of good performance, but the critical factor is looking for ones that tend to perform well each specific year, not just overall annualized returns..they may have been just lucky one year if you are only looking at the annualized returns. Every fund has it's bad years, but look for ones that consistently beat their peers and are in the top 25-50 percentile year after year. In addition to that, look for funds that have a lower "beta" than the index they are being measured against.
Now, if that all sounds like gobbledygook, you don't want to bother with the research, or you just don't care and think index funds sound like a good idea..that's fine and still not a huge deal..but in that case, I'd say you would be best off searching for index funds that use what's called an "equal weighting" strategy. That simply means they will invest in the same stocks contained in an index like the S&P 500, but they will give each stock an equal weight in the fund, which tends to reduce your overall volatility and risk. You can easily do a search on Google and find index funds that do this.
Just my $.02....compounded
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