ArticleZones.com » Finance » Mutual-funds » Mutual Funds - Index Funds for Low Expenses and High Returns
View PDF | Print View
Article By: M.L.Williams
Total views: 16
Word Count: 386
Mutual Funds - Index Funds for Low Expenses and High Returns
A Popular Option As A Mutual Fund - Index Funds
There are several different kinds of mutual funds, but a good one to consider is index funds. Index funds are a very common investment because of their usefulness.
Index Funds for Low Fees
Index mutual funds are mutual funds that invest in a cross section of stocks and securities chosen in such a way as to attempt to match one of the popular stock indexes' returns. There are mutual funds that attempt to match the Standard and Poors 500, for example, as well as other funds that try to match the return (up and down) of the Dow Jones Industrial Average, just to give a couple examples of index funds.
Index funds advantages
Index funds have several advantages, two of which I'll discuss here. One is that the average expenses of index funds tend to be lower because index funds do not require active management.
The term "active management" means that a person who is in charge of buying and selling stock for a fund is actively involved. A fund is frequently bought and sold under the direction of the manager, which generates costs to go with such transactions.
And, active management requires that a fund manager be hired who is an expert in stock picking and trading. Such a manager, of course, requires a salary commensurate with the manager's ability. Index funds, by contrast, require no active management. The stocks are chosen, often by a computer program, to match the return of the index with the least possible trading and virtually no discretion necessary on the part of the fund's management.
The second good reason for selecting index funds is similar to the first. Choosing an index fund means your returns will track a market index, which means that your fund will be generating a higher return than the over 50% of funds that do worse than those indexes.
You can enjoy the benefit of lower fees to be paid to the mutual fund investment company and your investment performing along with the market index it tracks. If you are in the market for a new way to invest, consider index mutual funds.
Article Source: ArticleZones.com
About the Author
Learn all about index mutual funds and other investment and personal finance issues at Mutual Fund Trader, a top website about the mutual fund category.