Lots of reasons to hold managed funds - low cost ones can do well, some categories are not amenable to indexing, some funds are unique.

@msf, thanks for the input. I agree with 2 of your points, "some categories are not amenable to indexing, some funds are unique". FD1000 mentioned that bond funds are a category that needs a good manager. You, bring-up SmallCap International as not being amenable to Indexing. I mentioned a great balanced fund like PRWCX and a unique fund like DSENX that continues to outperform the S&P 500. I think we are on the same page.
But I contend, the vast majority of funds talked about here, especially Domestic equity funds would probably best be held in zero cost index funds. Do you agree with that?
And a secondary point I was trying to make... holding a collection of funds in the same category is no different than holding a very high cost index fund. I tried to be subtle, but that's what I believe.

T. Rowe Price Global Technology Fund, Inc.
https://www.sec.gov/Archives/edgar/data/1116626/000111662619000004/gtfstatsticker-february20193.htm
497 1 gtfstatsticker-february20193.htm
T. ROWE PRICE GLOBAL TECHNOLOGY FUND
Supplement to Prospectus Dated May 1, 2018
On page 6, the portfolio manager table under “Management” is supplemented as follows:
Effective March 31, 2019, Alan Tu will replace Joshua K. Spencer as the fund’s portfolio manager and Chairman of the fund’s Investment Advisory Committee. Mr. Tu joined T. Rowe Price in 2014.
On page 9, the disclosure under “Portfolio Management” is supplemented as follow:
Effective March 31, 2019, Alan Tu will replace Joshua K. Spencer as Chairman of the fund’s Investment Advisory Committee. Mr. Tu joined the Firm in 2014 and his investment experience dates from 2010. Since joining the Firm, he has served as an equity investment analyst covering the technology sector. Prior to joining the Firm, he was an associate at Huron Consulting and then an investment analyst at Ananda Capital Management (beginning 2010).
The date of this supplement is February 14, 2019.
https://www.sec.gov/Archives/edgar/data/80248/000008024819000003/nhfstatsticker-february20192.htm
T. Rowe Price New Horizons Fund, Inc
497 1 nhfstatsticker-february20192.htm
T. ROWE PRICE NEW HORIZONS FUND
Supplement to Prospectus Dated May 1, 2018
On page 5, the portfolio manager table under “Management” is supplemented as follows:
Effective March 31, 2019, Joshua K. Spencer will replace Henry M. Ellenbogen as the fund’s portfolio manager and Chairman of the fund’s Investment Advisory Committee. Mr. Spencer joined T. Rowe Price in 2004.
On page 8, the disclosure under “Portfolio Management” is supplemented as follow:
Effective March 31, 2019, Joshua K. Spencer will replace Henry M. Ellenbogen as Chairman of the fund’s Investment Advisory Committee. Mr. Spencer joined the Firm in 2004 and his investment experience dates from 1998. He has served as a portfolio manager with the Firm throughout the past five years.
The date of this supplement is February 14, 2019.
F42-042 2/14/19

Can anyone explain why they use managed mutual funds that cost you 1-2% to own ...
What do others think? What are the reasons to use managed funds over free ETFs?

You're starting with a number of questionable assumptions:
- that ETFs are all passively managed index funds
- that my managed funds cost over 1%
- that mutual funds (as compared with ETFs) are actively managed, or even that they cost more than ETFs
I've said before that all else (or at least ERs and transaction costs) being equal, I'll take the mutual fund format over the ETF format because I don't risk tracking error (i.e. the part of tracking error from market price not matching NAV) and I'm not charged SEC Section 31 fees.
So I'll rewrite your question as: What are the reasons to use managed funds over index funds?
Almost none of the funds I own cost over 1%. I own a number of actively managed Vanguard funds that cost around 531;% or less. My two largest Vanguard holdings (which I've had for several years if not decades) continue to outperform; my newest (held for a couple of years) is still subject to reconsideration.
What would you suggest for small cap int'l? That's where I've had the most difficulty finding good, inexpensive funds. There's always VFSAX if one wants an index fund (or its ETF share class VSS if one insists), but one ought to be able to do better in this category. VINEX doesn't exactly excite, and ACINX has not done well for years. There are DFA funds (available through VAs, HSAs, etc.), but they're hard to get.
If one is willing to go up a bit in price, the stalwart PRIDX continues to roll along. Do you feel that index funds will do better than this?
What index fund do you feel would do a better job than RPHYX as a cash alternative? (Despite the high cost of RPHYX.)
Lots of reasons to hold managed funds - low cost ones can do well, some categories are not amenable to indexing, some funds are unique.
Still, I agree that it's getting harder to beat index funds, and over the next decade or two I'll likely shift more investments into index funds.

Investors don’t need to do anything at the moment. Since the advice is being handed out free by one of the big investment houses, consider its worth. Personally, it seems to me Goldman’s been right about 50% of the time.
Anybody ever consider that this kind of verbage (or another word that rhymes) is really more of an attempt by Goldman or whomever to get free advertising? No need to go for name recognition buying expensive ads if CNBC and others are willing to parade your name all day long in front of millions of readers and viewers.

FYI: Energy stocks aren’t necessarily the first place income investors look for yields.
Tethered to commodity prices and the vagaries of geopolitics, the sector can be volatile. The Energy Select Sector SPDR Fund (ticker: XLE) has gained about 11% in 2019, but has a five-year annual return of minus 2.75%, compared with 10.6% for the S&P 500.
Regards,
Ted
https://www.barrons.com/articles/oil-stocks-dividends-yields-51550094836?refsec=income-investing

Some recent writing (not that this is news to most here) is that it does NOT need to be 25x cashflow,
more like 22x
IOW a ~4.5% SWR

The answer is about 25 times your annual expenses at retirement. Mr. Bernstein is wrong for decades, if you listen to him, chances you will never retire, especially if you invest in Treasury inflation-protected securities and inflation-adjusted immediate annuities. You must own some stocks and you can do so much better long term with Multisector funds. Investing in TIPS? really? TIPS made just 1.43% annually in the last 5 years, even BND is a better choice. I have been commenting about him for years on Morningstar.

Huh, nearly the complete opposite from Mr. Buffett. Interesting. At the moment I'm roughly 65-35 equities to PIMCO bond funds. All of my equities are invested in dividend aristocrats (companies who have raised their dividends consecutively for 25 years or more) or those who almost make the cut. I think I'll stay where I am.

https://www.schwab.com/public/schwab/investing/investment_help/investment_research/etf_research/etfs.html?path=%2FProspect%2FResearch%2Fetfs%2Foverview%2FoneSourceETFs.asp%3Fsymbol%3Dundefined
Above is the no cost ETFs from Schwab.
Can anyone explain why they use managed mutual funds that cost you 1-2% to own when the same or likely better returns can be had with these no commission index funds? The selection is huge. I own managed funds but I often wonder why.
There are many here that collect 30, 40, 50+ mutual funds. That just has to dilute any manager affect. Wouldn't it? Why do we continue to believe we get better returns from a collection of higher cost investment vehicles when most all data suggests otherwise?
In saying that, I argued for a long time managers could "steer the ship" for a smoother, higher return ride. I don't believe it anymore. I have not totally jumped on the ETF band wagon myself but I may. I still believe for very specific funds a manager or formula can add value, for example I wouldn't give up the management at PRWCX just yet or the secret ingredient in the CAPE fund DSENX. But other than that I think I have to break away from this paradigm in believing managers can beat these no cost ETFs.
What do others think? What are the reasons to use managed funds over free ETFs?

FYI: (This is a follow up article.)
Fidelity Investments has expanded its platform to let loose a new volley of more than 500 commission-free ETFs and as of February 28, 2019, additional iShares ETFs.
One hour later, Schwab ETF OneSource one-upped competitor Fidelity by announcing it was doubling its lineup of commission-free ETFs to 503 in 79 Morningstar categories, and by adding 90 iShares ETFs to its offerings, starting one day after Fidelity, on March 1, 2019.
Regards,
Ted
https://www.fa-mag.com/news/fidelity-pulls-trigger-on-commission-free-etf-price-war--and-schwab-fires-back-43296.html?print
Schwab Website:
https://pressroom.aboutschwab.com/press-release/corporate-and-financial-news/schwab-etf-onesource-doubles-lineup-500-commission-free-e

Has anyone looked into opening brokerage accounts for bonus payments and buying short term Treasuries (at no commission)?
I started researching this, and see that E*Trade will pay $200 if you bring $25K to a new account for six months (1.6% annualized), that you could invest in a 2.4% six month Treasury.
https://us.etrade.com/what-we-offer/how-it-works/brokerage
Chase(!) has a similar offer, except that it requires you to keep the money there for only 90 days ($200/$25K for 90 days is 3.2% annualized bonus).
https://accounts.chase.com/youinvest/trade/offer?jp_cmp=rb/Chase_Brand_Exact_You+Invest_SEM_US_No+xLOB_Standard_NA
Merrill Edge will pay $100 if you bring in $20K for 90 days (2.0% annualized bonus), or $150 if you are (or become) a Preferred Rewards customer.
https://www.merrilledge.com/cmaoffer ($100)
https://www.merrilledge.com/offers/900offer ($150)

Which firm is the best?!
https://www.ft.com/content/00972e29-4390-346d-b2bc-7ffb35c4c8bf

Hi sir did u use that as cash position?!... Got few private muni bonds yield 4 or 5% but bbb-ratings in portfolio

The best 1 year CD option at Schwab right now is 2.5% from Wells Fargo (actually 13 months). Pretty poor pickings compared to a few months ago. The MM is at 2.33%, so not a lot of incentive to buy more CDs right now - for me anyway.
I have put some cash to work in a gold ETF FWIW.

FYI: On the heels of rewriting the rules of investing through its
groundbreaking ZERO offering, Fidelity Investments®, one of the largest financial service providers with
$6.7 trillion in total client assets, today announced the expansion of its commission-free exchange traded
fund (ETF) platform for individual investors and advisors to include more than 500 ETFs. The move will
offer clients access to high-quality, industry-leading ETFs and further exemplifies Fidelity’s ongoing
commitment to providing the best overall value in the industry. Fidelity has more than $380 billion in
ETF assets under administration, up nearly 80% over the last three years.1
Regards,
Ted
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/Fidelity-Expands-Commission-Free-ETF-Lineup_021219.pdf

@Derf: 2.750%
Regards,
Ted

FYI: Just rolled over BANKOFBARODA NEW YORK NY CD CPN: 2.250% Due : 2/12/2019 that I bought on 12/3/18 to Compass BK CD Birmingham AL CD CPN 2.300% Due 6/17/2019.
Regards,
Ted

Didn't read the article either, but doesn't seem to add anything new to the discussion. So I'll just reiterate my observations when the Buffett letter came out:
- I might have suggested 12% (that would amount to a three year buffer @4% drawdown/year), otherwise agree with MikeM
- Buffett (as well as Bogle) is enamored with the US market; I'd prefer a more global equity allocation.
Note also that Buffett did not instruct the trustee to invest 90/0/10 as the article claims. That was merely his advice:

My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.

http://www.berkshirehathaway.com/2013ar/2013ar.pdf