Myths and Misconceptions About Indexing
- Topics:
- Commercial Lending
- Tags:
- Asset Management,
- Operational Planning,
- Mutual Funds,
- Mutual Fund,
- Misconception,
- Investment,
- Human Resources,
- Finance,
- Business Operations,
- Benefits,
- ...
- Source:
- The Vanguard Group
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Overview: Since first being introduced in the early 1970s, indexing has become an important investment strategy for institutional and individual investors, and indexed assets have grown substantially, totaling $340.1 billion, or 5.6% of all mutual fund assets, as of December 31, 2002. However, indexing has also been continually criticized. These criticisms have given rise to a number of misconceptions, which persist despite research disproving them and despite the historical performance of index mutual funds. Several current misconceptions about indexing include: 1) all index mutual funds are managed equally; 2) indexing is a self-fulfilling prophecy; 3) indexing cash flows move markets; 4) index funds always underperform in a bear market; 5) equity index funds are tax-inefficient in a bear market. 6) indexing only works in certain market segments and 7) higher management costs are not equivalent to higher returns.
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Format: PDF | Size: 368KB | Date: Jul 2003 | Pages: 12
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