The Smartest Money Book You'll Ever Read: Everything You Need to Know About Growing, Spending, and Enjoying Your Money by Daniel R. Solin

Author:Daniel R. Solin [Solin, Daniel R.]
Language: eng
Format: mobi, pdf
Publisher: Penguin Group US
Published: 2011-12-26T14:00:00+00:00

Index Funds Are Ideal for Investors

I believe all investors should purchase only index funds for their investment portfolios. Here’s my reasoning:

• You know what you are buying: An index fund tracks a designated benchmark (like the Wilshire 5000), so there’s no guesswork about what’s in that part of your portfolio.

• You can better gauge risks and returns: An index fund manager matches the fund’s holdings to the index, so you don’t have the uncertainties created by active managers’ often futile efforts to boost returns.

• You can more easily rebalance: Because you can better gauge risks and returns, you can change your allocations more accurately with index funds than with actively managed funds.

As with any investment, past risks and returns of index funds may not be those of the future. However, a globally diversified portfolio of low management fee stock and bond index funds (in an asset allocation suitable for you) is likely to generate returns significantly higher than a comparable portfolio of actively managed funds over the long term.

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