Bob Brinker's Marketimer

  Monday November 20, 2017

Next Marketimer © Mailing Date: November 6th


© 1997-2017
Privacy Policy

Hosted by:
@ ADPAD INC.




HOW INDEX FUNDS WORK
Learn even more about this topic with the Encyclopedia of Personal Finance™

Investment markets are very complex. To build a portfolio of securities that consistently outperforms all other portfolios is virtually impossible. However, most portfolios do underperform the indexes used to "measure the market." Since index funds own the stocks that make up the index, they will perform as well as the market that the index measures. Most investors would like to boast about "beating the market." They hate to admit their portfolio did not even match it. Using an index fund gives these investors the best chance to at least match the market. However, if their index underperforms another index, their index fund can be expected to do likewise.

The advantage of index funds is that they keep pace with the market. Their downside is that they cannot outperform the market. Some fund managers buy the top-performing stocks in the index instead of all the stocks in the index in an attempt to "beat the market." Such funds, however, are not considered true index funds.

Even index funds that use the same index can be structured differently. Some allocate their holdings evenly among the index stocks. Others allocate a greater proportion to bigger companies than smaller ones. That is why different funds that use the same index have different returns.

Their competitive returns and lower management fees have made index funds popular for years.

Some other characteristics that appeal to investors will be discussed next.




LEARN EVEN MORE WITH THE ENCYCLOPEDIA OF PERSONAL FINANCE. CLICK HERE!

Powered by


Copyright ©1999-2017, Precision Information, LLC. All Rights Reserved