| The S&P 500 Index beat 68.6 percent of | | | | managed global equity funds. |
| actively managed large cap funds. What is an | | | | S&P's bond indexes outperformed 75 |
| index fund? And why should you choose to invest | | | | percent of managed domestic bond funds. |
| in one over an actively managed fund? Here is | | | | So why buy actively managed funds? An actively |
| the rationale: | | | | managed mutual fund is one where you pay a |
| Index funds mirror a particular index like the | | | | broker or advisor a fee to have access to a fund. |
| S&P 500 or the Dow Jones Industrial | | | | Then the fund is managed by an advisor who is |
| Average. An index is a group of stocks that | | | | paid by a percentage of the assets under |
| represent a particular style and class. For | | | | management. Don't forget that there can also be |
| example, the S&P 500 index is made up of | | | | a trading fee involved. So you have a make up all |
| the 500 largest companies by capitalization that | | | | those fees before you are making any money. |
| are most actively traded. Therefore, the term | | | | You are betting that this money manager is so |
| "large cap". There is little or no management fee | | | | good that not only will he/she be able to make up |
| because an index mutual fund just tracks it's | | | | those fees but also give you a return that is |
| corresponding index. When you purchase an index | | | | higher than you just purchasing an index fund. The |
| fund there is no upfront sales charge or | | | | majority of money managers have not been able |
| commission since they are no-load. | | | | to do that. The only category where the majority |
| But what kind of return can you have? Well | | | | of active managers beat the index was |
| consider these facts: | | | | emerging-market bond funds. |
| The S&P SmallCap 600 outperformed 77.8 | | | | You can get a lot of diversification by using index |
| percent of actively managed small-cap funds. | | | | funds as well as saving a lot of money on |
| 75.9 percent of managed mid-cap funds | | | | management and broker fees. |
| underperformed S&P's MidCap 400. | | | | If you want a diversified portfolio that is low cost, |
| On the international front of the S&P's Global | | | | easy to maintain, and easy to understand, then a |
| 1200 Index beat out 70.1 percent of the actively | | | | mix of index funds is a wise choice. |