• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Newstez.blog

Latest News, Breaking News, Live News Updates

  • Home
    • Privacy Policy
    • Disclaimer
    • Contact Us
    • About Us
  • Career
  • Politics
  • Bollywood
  • Hollywood
  • Society
  • economy
You are here: Home / Education / Home Learning Study STD-10 Materials Video | Diksha App & DD Girnar

ગૌણ સેવામાં ૪૩૦૪ જગ્યા ભરતી (ઓજસ)

રાજકોટ મહાનગરપાલિકા ભરતી

GSRTC ડ્રાઈવર ભરતી ૪૦૬૨ જગ્યાઓ

હાલમાં શરુ લેટેસ્ટ સરકારી ભરતી જાહેરાત માહિતી

વાંચન માટે ગૂગલની બેસ્ટ એપ

આલ્બમ જેવા ફોટો બનાવવા માટેની બેસ્ટ એપ

કોલર નામ એનાઉન્સર બેસ્ટ એપ

ડીલેટ થયેલા ફોટો રીકવર કરવા માટે બેસ્ટ એપ

બાળકો માટે ગમ્મત સાથે ગણિત શીખવા બેસ્ટ એપ

ધોરણ ૧ થી ૧૨ પાઠ્યપુસ્તક ડાઉનલોડ કરો

Home Learning Study STD-10 Materials Video | Diksha App & DD Girnar

June 11, 2021 by admin Leave a Comment

વોટ્સએપ ગ્રુપમાં જોડાવા ક્લિક કરો

ટેલીગ્રામ ચેનલમાં જોડાવા ક્લિક કરો

Home Learning Study STD-10 Materials Video | Diksha App & DD Girnar


What Is an Index Fund?

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These funds follow their benchmark index regardless of the state of the markets.

Index funds are generally considered ideal core portfolio holdings for retirement accounts, such as individual retirement accounts (IRAs) and 401(k) accounts. Legendary investor Warren Buffett has recommended index funds as a haven for savings for the later years of life. Rather than picking out individual stocks for investment, he has said, it makes more sense for the average investor to buy all of the S&P 500 companies at the low cost an index fund offers.

KEY TAKEAWAYS

An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.

Index funds have lower expenses and fees than actively managed funds.

Index funds follow a passive investment strategy.

Index funds seek to match the risk and return of the market, on the theory that in the long-term, the market will outperform any single investment.

John Bogle on Starting World’s First Index Fund

How an Index Fund Works

“Indexing” is a form of passive fund management. Instead of a fund portfolio manager actively stock picking and market timing—that is, choosing securities to invest in and strategizing when to buy and sell them—the fund manager builds a portfolio whose holdings mirror the securities of a particular index. The idea is that by mimicking the profile of the index—the stock market as a whole, or a broad segment of it—the fund will match its performance as well.

Home Learning Study STD-10

There is an index, and an index fund, for nearly every financial market in existence. In the U.S, the most popular index funds track the S&P 500. But several other indexes are widely used as well, including:

Russell 2000, made up of small-cap company stocks

Wilshire 5000 Total Market Index, the largest U.S. equities index

MSCI EAFE, consisting of foreign stocks from Europe, Australasia, and the Far East

Bloomberg Barclays US Aggregate Bond Index, which follows the total bond market

Nasdaq Composite made up of 3,000 stocks listed on the Nasdaq exchange

Dow Jones Industrial Average (DJIA), consisting of 30 large-cap companies

An index fund tracking the DJIA, for example, would invest in the same 30, large and publicly-owned companies that comprise that index.

Portfolios of index funds substantially only change when their benchmark indexes change. If the fund is following a weighted index, its managers may periodically re-balance the percentage of different securities to reflect the weight of their presence in the benchmark. Weighting is a method used to balance out the influence of any single holding in an index or a portfolio.

Index Funds vs. Actively Managed Funds

Investing in an index fund is a form of passive investing. The opposite strategy is active investing, as realized in actively managed mutual funds—the ones with the securities-picking, market-timing portfolio manager described above.

Lower Costs

One primary advantage that index funds have over their actively managed counterparts is the lower management expense ratio. A fund’s expense ratio—also known as the management expense ratio—includes all of the operating expenses such as the payment to advisors and managers, transaction fees, taxes, and accounting fees.

Since the index fund managers are simply replicating the performance of a benchmark index, they do not need the services of research analysts and others that assist in the stock-selection process. Managers of index funds trade holdings less often, incurring fewer transaction fees and commissions. In contrast, actively managed funds have larger staffs and conduct more transactions, driving up the cost of doing business.

The extra costs of fund management are reflected in the fund’s expense ratio and get passed on to investors. As a result, cheap index funds often cost less than a percent—0.2%-0.5% is typical, with some firms offering even lower expense ratios of 0.05% or less—compared to the much higher fees actively managed funds command, typically 1% to 2.5%.

Expense ratios directly impact the overall performance of a fund. Actively managed funds, with their often-higher expense ratios, are automatically at a disadvantage to index funds, and struggle to keep up with their benchmarks in terms of overall return.

If you have an online brokerage account, check its mutual fund or ETF screener to see which index funds are available to you.

Better Returns?

Lowered expense leads to better performance. Advocates argue that passive funds have been successful in outperforming most actively managed mutual funds. It is true that a majority of mutual funds fail to beat broad indexes. For example, during the five years ending December 2019, 80% of large-cap funds generated a return less than the S&P 500, according to SPIVA Scorecard data from S&P Dow Jones Indices.1

On the other hand, passively managed funds do not attempt to beat the market. Their strategy instead seeks to match the overall risk and return of the market—on the theory that the market always wins.

Passive management leading to positive performance tends to be true over the long term. With shorter timespans, active mutual funds do better. The SPIVA Scorecard indicates that in a span of one year, only 70% of large-cap mutual funds underperformed the S&P 500. In other words, over one-third of them beat it in the short term. Also, in other categories, actively managed money rules. As an example, nearly 70% of mid-cap mutual funds beat their S&P MidCap 400 Growth Index benchmark, in the course of a year.2

Even over the long term, when an actively managed fund is good, it is very, very good. Investor’s Business Daily’s “Best Mutual Funds 2019” report lists dozens of funds that have racked up a 10-year average total return of 15% to 19%, compared to the S&P 500’s 13.12%. They’ve significantly outperformed the market in one-, three-, and five-year periods, too. Admittedly, this a feat that only 13% of the 8,000 mutual funds out there can claim, as detailed in the report.

Real-World Example of Index Funds

Index funds have been around since the 1970s. The popularity of passive investing, the appeal of low fees, and a long-running bull market have combined to send them soaring in the 2010s. For 2018, according to Morningstar Research, investors poured more than US$458 billion into index funds across all asset classes. For the same period, actively managed funds experienced $301 billion in outflows.3

The one fund that started it all, founded by Vanguard chair John Bogle in 1976, remains one of the best for its overall long-term performance and low cost. The Vanguard 500 Index Fund has tracked the S&P 500 faithfully, in composition and performance. It posts a one-year return of 7.37%, vs. the index’s 7.51%, as of July 2020, for example. For its Admiral Shares, the expense ratio is 0.04%, and its minimum investment is $3,000.4

Frequently Asked Questions

What is an index fund?

An index fund is an investment product that aims to match, rather than exceed, the performance of an underlying index. Examples of the kinds of indexes tracked by index funds include the Standard & Poor’s 500 Index, better known as the S&P 500; or the Dow Jones Industrial Average (DJIA). Index funds have grown in popularity in recent years, as a growing number of investors have adopted passive investing strategies. One of their main strengths is the low fees that they charge relative to active investment funds.

How do index funds work?

Index funds are often structured as exchange-traded funds (ETFs). These products are essentially portfolios of stocks that are managed by a professional financial firm, in which each share represents a small ownership stake in the entire portfolio. For index funds, the goal of the financial firm is not to outperform the underlying index but simply to match its performance. If, for example, a particular stock makes up 1% of the index, then the firm managing the index fund will seek to mimic that same composition by making 1% of its portfolio consist of that stock.

Do index funds have fees?

Yes, index funds have fees, but they are generally much lower than competing products. Many index funds offer fees of less than 0.20%, whereas active funds often charge fees of over 1.00%. This difference in fees can have a large effect on investors’ returns when compounded over long timeframes. This is one of the main reasons why index funds have become such a popular investment option in recent years.

Compete Risk-Free with $100,000 in Virtual Cash

Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you’re ready to enter the real market, you’ve had the practice you need. Try our Stock Simulator today.

હોમલર્નિંગ સમયપત્રક ડાઉનલોડ કરવા અહી ક્લિક કરો

IMPORTANT LINK FOR VIDEO::

04/02/2022: વિડીયો જોવા ક્લિક કરો

03/02/2022: વિડીયો જોવા ક્લિક કરો

02/02/2022: વિડીયો જોવા ક્લિક કરો

31/01/2022: વિડીયો જોવા ક્લિક કરો

28/01/2022: વિડીયો જોવા ક્લિક કરો

27/01/2022: વિડીયો જોવા ક્લિક કરો

25/01/2022: વિડીયો જોવા ક્લિક કરો

24/01/2022: વિડીયો જોવા ક્લિક કરો

22/01/2022: વિડીયો જોવા ક્લિક કરો

15/01/2022: વિડીયો જોવા ક્લિક કરો

13/01/2022: વિડીયો જોવા ક્લિક કરો

12/01/2022: વિડીયો જોવા ક્લિક કરો

07/01/2022: વિડીયો જોવા ક્લિક કરો

06/01/2022: વિડીયો જોવા ક્લિક કરો

05/01/2022: વિડીયો જોવા ક્લિક કરો

વોટ્સએપ ગ્રુપમાં જોડાવા ક્લિક કરો

ટેલીગ્રામ ચેનલમાં જોડાવા ક્લિક કરો

Filed Under: Education Tagged With: Home Learning

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Join Whatsapp Join Now

Recent Posts

  • India Post GDS Recruitment 2024: 44,228 Posts For 10th-Pass
  • Lokshabha Elections Results 2024 Live Updates; How To Check Results @results.eci.gov.in
  • GSEB SSC Result 2024 @ gseb.org
  • GSEB HSC Result 2024 – GSEB 12th General Result 2024 @gseb.org
  • Gujarat Police Bharti 2024 – Apply For 12472 Posts @OJAS

Recent Comments

  • Ajit on GUJARAT NO SANSKRUTIK VARSO STUDY MATERIALS PDF FILE
  • Darshil B Patel on Meri Maati Mera Desh Certificate Download Here
  • Priya bhan on GPSC Recruitment 2023 – Apply Online for 309 Vacancy
  • Udaysinh on Chandrayaan-3: India’s Ambitious Lunar Mission Continues
  • Udaysinh on Chandrayaan-3: India’s Ambitious Lunar Mission Continues

Archives

  • July 2024
  • June 2024
  • May 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • February 2019
  • November 2018
  • September 2018

Categories

  • Answer Key
  • Bollywood
  • Breaking Now
  • Call Letter
  • Career
  • economy
  • Education
  • Exam
  • Game
  • Health
  • Jio Offer
  • Paripatra
  • Politics
  • Result
  • Society
  • Study material
  • Technology
  • Uncategorized
  • Yojana

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

Copyright © 2025 · Genesis Sample on Genesis Framework · WordPress · Log in