Best Guide to Mutual Funds
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Best Guide to Mutual Funds |
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Fundamentals of Mutual
Funds
 Mutual fund basicsMutual Fund InvestmentBuy Mutual FundsMake money in mutual fundsBest mutual fundsMutual fund analysisTypes of Mutual Funds
Type of mutual fundsNo Load Mutual fundsCommodity Mutual FundDonor advised mutual fundsMicro cap mutual fundsClosed End Mutual FundsBear Market Mutual FundsMajor Exchange Traded FundsTax Exempt Bond FundsDynamic Mutual FundsInvestment and Money market
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Are Index Funds too Expensive to Invest in?There is an ongoing debate right now about the best mutual funds and the best index funds of the market. The people who are in favor of active management,On the other hand, the supporters of index mutual funds use as an argument the fact that through out all history, they have proven more reliable than mutual funds. Who is right? Let's look at index funds and find out how true is their argument. After all, only one of them must be right. What Are Index Funds?Index funds (also known as index trackers) are very, very old. Their history goes back to the 17th century. During the renaissance, world famous figures like Blaise Pascal or Edmund Halley created the bases for risk management and the theory of probability, both of which are the pillars of modern finances. These theories were the ones that made possible their creation.Index funds can be used for different types of market sectors. For example, there are commodity index funds, quite popular due to the price increment of raw materials. Since the BRIC (Brazil, Russia, India and China) countries continue to buy commodities for their growing economies, it seems that they will be very solicited for some time. The great thing about this financial instrument is the cost of funds index. Since they don't require any kind of active management, users save money on management fees. Although the majority of times it doesn't exceed the 2%, it can be a considerable amount of money if we are making an investment of six figures. Besides the traditional index fund, there are the fundamental index funds, also known as quad funds. In this kind of funds, the index isn't composed by the trends of the market, but by quantitative goals. For example, companies that have achieved determined levels of profit or don't own a certain percentage of money. The problem with quad funds is that, since they require active management, they have a higher fee than typical index funds (but not as high as mutual funds.). Disadvantage Of Index FundsThe disadvantage of index funds is that their return over investment is low when compared with other financial instruments; even with the best index funds. For example, if you bought stock from oil or mining companies just before commodities soared to the skies, then there is no way in which an index fund is going to outperform this kind of investment.Another disadvantage of index funds is that they are subject to the same financial trouble as the rest of securities. For example, if you had an index fund in technology just before the market bubble of the dot com's, then it is very probable that your performance ratio was compromised. Continue to: Availability Of Index Mutual Funds Related ArticlesBest Comparison of the Top Mutual Fund CompaniesAdhere to social ethics, get socially responsible mutual funds Trust Balanced Mutual funds for safer investment Kids Mutual Funds - Fulfill your kids dream at an early age Mutual Fund Scandal - How to Evade it?  Bookmark
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