Has index evolution led to index pollution?
The 1976 launch of the Vanguard 500 Index Fund created an entirely new philosophy of investing – holding all the stocks in the market instead of trying to pick potential winners.
The concept of indexing is certainly simple. Instead of trying to beat the market, you try to meet the market. The expenses are usually low and the strategy has often worked. Many studies have shown that the bulk of traditional mutual funds haven’t been able to keep pace with index funds over time.
But the industry has grown, and today there are more than 1,000 index funds and exchange-traded funds (ETFs) available. Many of them target specific countries such as Malaysia, industries such as biotechnology, and even strategies such as long or short investing. It’s hard to determine which index fund or ETF is right for you.
The best advice is to keep it simple. If you think index funds are right for you, and you’ve discussed it with your financial advisor, you may want to stick with the basics – such as investing in one U.S. stock fund, one international stock fund and one bond fund.
If you feel the need for a more complex index fund because you want to correct overexposure or underexposure to a certain region or sector, that’s certainly an option. There are plenty of funds to choose from.
Indexing has become confusing, but it presents so many opportunities that it’s worth considering. Your financial advisor can help you determine if indexing is suitable for you based on your individual situation and goals.
Index Funds Are Worth a Close Look
Has index evolution led to index pollution?
The 1976 launch of the Vanguard 500 Index Fund created an entirely new philosophy of investing – holding all the stocks in the market instead of trying to pick potential winners.
The concept of indexing is certainly simple. Instead of trying to beat the market, you try to meet the market. The expenses are usually low and the strategy has often worked. Many studies have shown that the bulk of traditional mutual funds haven’t been able to keep pace with index funds over time.
But the industry has grown, and today there are more than 1,000 index funds and exchange-traded funds (ETFs) available. Many of them target specific countries such as Malaysia, industries such as biotechnology, and even strategies such as long or short investing. It’s hard to determine which index fund or ETF is right for you.
The best advice is to keep it simple. If you think index funds are right for you, and you’ve discussed it with your financial advisor, you may want to stick with the basics – such as investing in one U.S. stock fund, one international stock fund and one bond fund.
If you feel the need for a more complex index fund because you want to correct overexposure or underexposure to a certain region or sector, that’s certainly an option. There are plenty of funds to choose from.
Indexing has become confusing, but it presents so many opportunities that it’s worth considering. Your financial advisor can help you determine if indexing is suitable for you based on your individual situation and goals.