Charles Ellis on Active Funds
Contrary to their oft articulated goal of outperforming the market averages, investment managers are not beating the market; the market is beating them.
Peter Lynch on Index Funds
Most investors would be better off in an index fund. Tweet Me
Warren Buffett on Index Funds
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results after fees and expenses of the great majority of investment professionals.
Burton Makiel on Index Funds
Index funds have regularly produced rates of return exceeding those of active managers by close to 2 percentage points. Active management as a whole cannot achieve gross returns exceeding the market as a whole and therefore they must, on average, underperform the indexes by the amount of these expense and transaction costs disadvantages.
Charles Schwab on Index Funds
It’s fun to play around. It’s human nature to try to select the right horse. But for the average person, I’m more of an indexer. The predictability is so high that for 10, 15, 20 years you’ll be in the 85th percentile of performance. Why would you screw it up?
Meir Statman on Index Funds
The house (casino) takes a cut on each spin of the wheel, paying out less in winnings than it collects in bets. So roulette is a negative-sum game, and so is your non-index mutual fund.
Bethany McLean on Index Funds
Skepticism about past returns is crucial. The truth is, much as you may wish you could know which funds will be hot, you can’t and neither can the legions of advisers and publications that claim they can. That’s why building a portfolio around index funds isn’t really settling for average. It’s just refusing to believe in magic.
Jim Wiandt on Index Funds
In these topsy turvy days of volatile markets, who knows what’s up or down? The Dow could be up 250 today, and down 300 tomorrow. It’s a fool’s game playing market direction, and every die hard index fund investor knows it.
Robert Barker on Index Funds
Yet even the smartest, most determined fund-picker can’t escape a host of nasty surprises. Next time you’re tempted to buy anything other than an index fund, remember this and think again.
James Vertin on Index Funds
After twenty years of watching investment practitioners dance around the fire shaking their feathered sticks, I observe that far too many of their patients die and that the turnover of medicine men is rather high. There must be a better way. And there is! [index funds].
What is an Index Fund?
A fund which aims to mimic returns of the benchmark index is called an Index fund.
How Index Fund Replicates Returns?
By buying same stocks in the same proportion as the index.
Who launched World’s First Index Fund?
John C. Bogle launched Vanguard 500 Index in 1975 which tracks S&P 500 Index.
6 Benefits of Cheap Index Funds
- Minimal fees.
- Low portfolio turnover.
- Fund size is not a matter of concern.
- Expense ratio goes down as fund corpus increases.
- Passive investing.
- Diversification at a fraction of cost.
Disadvantages of Cheap Index Funds
Returns are slightly less than benchmark index due to tracking error.
Who should Invest in Cheap Index Funds?
Anybody who does not have time to invest directly in stock market, or don’t know to pick winning stocks.
Why Invest in Cheap Index Funds?
To beat inflation.
For low cost, passive investing approach to investments.
For indirect and hassle free route to investment.
To outperform most active mutual fund managers.
Moral of the Story
Index Funds provide low cost, indirect route to investing in stock market, through passive investment approach.