| Mutual funds come in a number of different | | | | investment managers, some of which include Dow |
| categories, which all vary according to the rates | | | | Jones Industrial Average, the Wishire 5000 and |
| of return, risk factor involved as well as the | | | | the FTSE 100. Other indexes have been |
| period of time they take to mature. An index | | | | personalized by some individual companies in order |
| mutual fund is a category of investment that | | | | to be able to develop investment pricing systems. |
| seeks to ensure stability of a specific financial | | | | The indexes, whether personalized or captured in |
| market, regardless of the prevailing market | | | | a software, should be guided by research which |
| condition, be they good or bad. They do so by | | | | touches on dividends, earnings, book value and |
| tracking the performance of the securities in a | | | | sales as well. |
| particular investment. | | | | There are many methods of creating indexes and |
| To ease the tracking movement, there is a | | | | one should be aware of the different methods, in |
| software that one can make use of. The | | | | case they would want to understand the |
| software requires little human input and hence, | | | | differences in the methods. One of them is the |
| there is minimal interference with the records. | | | | traditional indexing which is the practice of owning |
| This means that index mutual funds therefore | | | | a collection of securities in the same ratios as the |
| require no form of active management and can | | | | target index. The synthetic indexing is the use of |
| do well in passive management. This directly | | | | a combination of equity and low risk bonds. The |
| translates to lower management fees and lower | | | | combination is meant to replicate the performance |
| taxes as well. | | | | of a similar investment. |
| Index investments can be bought from many | | | | |