The Index Fund Approach: Tracking the Market

The goal of many individual investors is to beat the market. A large number, however, don’t—particularly when the costs of trying to do so are considered. One alternative is to apply the old adage, “If you can’t beat ’em, join ’em.” The index fund concept allows investors to do just that. A portfolio of stocks…

 

Two Traits that Give Active Mutual Funds an Edge

American Funds says that some actively managed funds are better than passive (index) funds. Specifically, the company argues that actively managed funds with low expense ratios and high levels of manager ownership (a group that Amercian Funds calls “Select Active”) outperform their index peers. The outperformance is evident over one-, three-, five-, and 10-year rolling…

 

How to Measure the Skills of Your Fund Manager

According to the Investment Company Institute’s Fact Book, in 2015, there were over 16,000 mutual funds, closed-end funds and exchange-traded funds. This is more than the current number of stocks listed on the NASDAQ, NYSE and Amex exchanges. [Editor’s note: As of January 31, 2017, there were over 4,700 stocks listed on the major exchanges…

 

How Risky are ETFs?

The August 24 “flash crash” has some industry experts questioning the safety of ETFs, according to a Wall Street Journal article. ETFs, or exchange-traded funds, offer investors the diversification of a closed-end mutual fund but differ in that they trade on exchanges all day like stocks. Beyond offering the ability to trade like stocks, ETFs…

 

Beware of Paying Active Management Fees to a Passive Manager

Indexed mutual funds (passively managed funds) aim to track an index or some segment of the market with low fees. Anyone who has heard of John Bogle knows that runaway fees can eat into your portfolio performance over the long run. However, a recent post at AlphaBetaWorks Insights warns of “closet indexing”: the practice of charging active…