Index Fund Investing

It's said that more than eighty percent of mutual fund managers fail to beat the S&P 500 index. If so few funds beat the index, then why do investors still flock to actively managed funds?

This is a question for the ages. My guess is because that is what is sold to them.

Index funds offer the investor the best way to match the performance of the index. This is good news and it's bad news.

Let's cover some basics first

What is an index?

The Dow, the S&P 500, the Nasdaq 100, the Russell 2000 are all indexes. Each is a basket of stocks created to offer representation of different areas of the stock market. The Standard & Poor's 500 is the benchmark for most index investing. It is comprised of the stocks of the 500 US companies from leading industries. Another index is the Wilshire 5000 index representing all publicly traded companies in the U.S.

Index Fund Investing: The Good News

Index Fund Investing: The Bad News