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The Lowdown on Index Funds

• Lowdown on Index Funds

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 The Lowdown on Index Funds Index funds offer
investors a return directly tied to each market,
while minimal amounts are charged for expenses.
Despite its advantages and growing popularity,
not everyone knows exactly what index funds are,
or how they stack up against the many other funds
on the market. Here, we take a closer look and
see how they evolve over time compared to
actively managed assets.
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Active vs Passive Management Before delving into
the details of index funds, it is important to
understand the two predominant styles of mutual
fund management passive and active. Most mutual
funds fall into the active management
category forex trading platforms in
India.  Active management involves the dual art
of stock selection and market timing. This means
that the fund manager tests his abilities to
select stocks that outperform the market. 
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What Benefits Does Indexing Provide? There are
two main reasons why a person may choose to
invest in an index fund. The first refers to a
theory of investment known as the efficient
market hypothesis. This theory says that all
markets are efficient and that it is impossible
for investors to achieve above-average returns
because all the relevant information that can
affect the price of a share is already included
in the price best broker in India for forex. 
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What Are You Missing Out On? One of the main
arguments of active managers is that when
investing in an index fund, investors give up
before they even start. These managers believe
that the market has already beaten investors who
buy these types of funds about foreign exchange
market you. Since an index fund always delivers
the same return as the market it is pursuing,
index investors cannot participate in anomalies
that may arise. For example, during the tech boom
of the late 1990s, when stocks in tech startups
hit record highs, index funds were unable to
match the record returns of some actively managed
funds.
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What Are the Results? Typically, when you look at
the performance of long-term mutual funds, you
see a trend for actively managed funds to
underperform the SP 500 index. A common
statistic is that the SP 500 is outperforming
80 of funds. While this statistic will be true
in a few years, it is not always the case. The
Bottom Line It is true that some mutual funds
will significantly outperform the market in the
short term. However, in the long run, active
investments tend to outperform passive
indexation, especially after fees and taxes are
taken into account. It's almost as difficult to
choose from thousands of these high-performance
products as choosing the stock yourself! Whether
or not you believe in efficient markets, the
costs associated with investing in most mutual
funds make it very difficult to outperform an
index fund over the long term.
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Thank you
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