| We all remember the story of the tortoise and | | | | Each person has a distinct style and keep in mind |
| the hare. It was in this tale that we learned a | | | | that index funds are different from normal mutual |
| valuable lesson: slow and steady wins the race. | | | | funds. |
| The tortoise was not a glamorous creature and | | | | Most mutual funds are actively managed so a |
| he may have lacked pizzazz, but in the end, he | | | | fund manager is constantly picking new or |
| won. | | | | different stocks to go into the fund. This active |
| In a way, index funds are the modern-day | | | | attempt to beat the market is based mostly on |
| tortoise in the race for a solid investment plan. | | | | timing and choosing the right stocks and bonds. |
| Nothing flashy, just steadily keeping pace with a | | | | This can sometimes pay off. Other times it does |
| particular index, and if, by chance, that index does | | | | not. Index funds, on the other hand, are a passive |
| well, then the fund excels also. | | | | investment meaning they are not actively |
| Index funds, which are a type of mutual fund, are | | | | managed. |
| a pretty simple concept in the world of | | | | But one of the most attractive parts of index |
| investments. In an index fund, stocks are grouped | | | | funds stems from the lack of active |
| together from companies included within an index, | | | | management. Because they don't require the |
| for instance the S&P 500 or the Dow Jones | | | | same constant administration and attention as an |
| Industrial Average. The percentage of stock is | | | | actively managed mutual fund, their expense |
| kept the same as the indexes themselves in an | | | | ratios are generally lower. |
| attempt to mirror the index. While it's a rather | | | | Some say if you can't beat a market, you might |
| basic concept, it's one that for some has proven | | | | as well join it which is one of the biggest |
| to be successful over time. | | | | attributes of an index fund. The funds are great |
| The Dow Jones Industrial Average (DIJA) is a | | | | for people who wish to follow the market. |
| price weighted index of 30 of the largest, most | | | | So are index funds for you? That depends on |
| widely held stocks traded on the New York Stock | | | | your investment style. As always, you should |
| Exchange. The S&P 500 is an unmanaged | | | | check with a financial professional before investing, |
| group of securities considered to be | | | | and decide if index funds fit in with your overall |
| representative of the stock market in general. | | | | investment strategy. But in the end, index funds |
| Whether or not you want to invest in an index | | | | offer an alternative way to potentially increasing |
| fund depends on the type of investor you are. | | | | your wealth and achieving your financial goals. |