April 2016 - Why Aren’t More People Invested in Index Funds?
Vanguard opened the first index mutual fund for individual investors 40 years ago; now there are trillions of dollars invested in index-based mutual funds. Index-based mutual funds provide affordability, diversification and simplicity.
With an ever-changing market, why aren’t more people indexing? More often than not, fund companies target investors who seek to outperform the market. However, fund managers rarely outperform the market consistently over time. A standard investment disclosure is: "Past performance does not guarantee future performance." Actively managed funds typically have higher expenses than indexed-based funds and may assume more risk. Their fees can eat away at an investor's total earnings. Some actively managed funds do outperform, but investors should take expenses into consideration.
Index funds usually have lower expenses, are broadly diversified, and therefore may be less risky. These funds track the performance of their benchmarks, such as the S&P 500®
. Since most index funds do not have a large portion of cash sitting on the sidelines waiting for trending market activities, more of your investment dollars are at work.
Credit Union Investment Services makes investing simple by recommending well-diversified, low-cost, index-based mutual funds that are appropriate for your situation. If you would like to meet with an Investment Representative, contact your local Credit Union branch.
Investment advisory services offered to North Carolina residents through Credit Union Investment Services. Securities offered through SECU Brokerage Services. Member FINRA, SIPC. Securities products are not credit union deposits. They are not obligations of or guaranteed by a credit union or its affiliates. They are not insured by the NCUA or any federal government agency. Securities products involve investment risks, including possible loss of principal. Investment representatives are also credit union employees, who may accept deposits.
Previous Investing Basics: