Index Mutual Funds

Index Funds: index funds are mutual funds that attempt to imitate the performance of a stock market index.

If you are searching for a fund where you can just put your money and watch how they grow, without having to participate in the market, then index funds are the right place to park your money. Some of the indexes that mutual funds try to copy are: S&P 500, Wilshire 5000, MCSI-EAFE, Russell 2000, NASDAQ 100, etc.

Index Fund Advantages

1. Tax-friendly

   Index funds overcome one of the drawbacks of mutual funds, namely the tax burden they carry with them. Due to the fact that index funds hold the stock much longer than the other types of mutual funds, they can invest the money that should otherwise be paid as taxes, and thus generate higher returns.

2. Low fees

   Thanks to the high computerization of procedures, the need for an expensive fund manager is eliminated. Furthermore, this also greatly reduces the number of staff that should be employed, which leads to generally lower fees. For instance, the expense ratio of an index fund can be as low as 0.18% as compared to the over 3.0% observed in the actively managed funds.

3. Outstanding performance

   The simple statistic that the S&P 500 beats the returns of 80% of actively managed funds provides the evidence of this statement. You can see for yourself!

If you are a buy-and-hold type of investor, index funds are what you are searching for the investment of your hard earned money.

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