Anchor Your Portfolio With Index Funds
- Topics:
- Commercial Lending
- Tags:
- Benefits,
- Finance,
- Fund Manager,
- Human Resources,
- Index Fund,
- Investment,
- Mutual Funds,
- Retirement Plans,
- Stock
- Source:
- McGraw-Hill Companies
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Overview: One of the most basic distinctions between mutual funds is whether the fund manager employs an active or a passive management approach. An active management style means the fund manager uses analytic or forecasting tools to select individual stocks for the fund portfolio. In a passive approach, the fund manager simply buys whatever stocks are represented by a well-known market index. Funds that attempt to match exactly the day-to-day fluctuations of a market index are known as index funds. The article asserts that two approaches to stock selection are active and passive. Index funds are passively managed — they mirror the risk characteristics of the underlying index. Fees and expenses are usually much lower than with actively managed funds, helping index funds to outperform many actively managed funds. One can use index funds to anchor your portfolio, and then customize your portfolio by selecting some actively managed funds. Some actively managed stock mutual funds have consistently outperformed index funds.
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Format: PDF | Size: 56KB | Date: Jan 2003 | Pages: 2
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