Index Funds

So I have always had mutual funds they were always basically a savings account with slightly better interest. I have a new 401k with a company an their plan is through fidelity. The funds aren't as attractive as the ones I have with vanguard. However I was watching a frontline episode on 401ks and mutual funds, basically the CEO of vanguard said the best thing you can do is invest in Index funds, they eliminate the fees associated with mutual funds. A bit riskier, just wondering if anyone else has used these?

Thanks!

 

Yes, big attraction being no/ultra low fees associated with an index fund. I would bet if you look over a period of time (years or a few decades) you'll find a basic composit of mainstream index funds are even or outperform a lot of managed funds...if maybe just by virtue of no fees. I would question which indexes or index is or are being tracked... There's a few out there and some odd ones (to say the least). I particapte through and as part of my retirement and have not purchased an index fund outside of my companies provided 401k.

One other thing to remember, if you have a broker, they are in most cases not a fan of index funds as it cuts or eliminates their fees. Making it hard to get an honest answer from a "professional".

You could use an approach similar to mine. Begin investing a small percentage and watch it over time. Another method I've used in the past is finding each (or at least major) components that makes the index (or mutual if you want) find and find the historical performance...of course that doesn't always predict the future but, it helps give me some confidence.

 

Thanks, I will be doing more research on which index funds my 401k offer. Most of the mutual funds that have performed well over the past yrs through Fidelity all have fees associated with them. Over the life of the fund, the amount paid is staggering.

Thanks

 

Yea yea, you ever do any day trading? I have in the past and run into some issues but, thinking of getting back into it. Any thoughts?

But, I've also put together my own little index of blue chips (10 differ equities) I though had decent management, decent EPS and not a recent IPO. It's done okay and over the past several months has performed at or above the S&P. These would not be for day trading but, something I've been playing with...it's actually entertaining to me.

 

Yea yea, you ever do any day trading? I have in the past and run into some issues but, thinking of getting back into it. Any thoughts?

But, I've also put together my own little index of blue chips (10 different equities) I thought had decent management, decent EPS and not a recent IPO. It's done okay and over the past several months has performed at or above the S&P. These would not be for day trading but, something I've been playing with...it's actually entertaining to me.

 

For the common investor index funds are the way to go. They do not eliminate all fees, the fees are reduced. Active management will cost you around 1-2%, whereas index funds usually cost less than 0.2%, a significant savings compounded over a lifetime. I do not view index funds as being riskier. Where did you hear that? The risk comes from the underlying- i.e. a short term treasury fund is less risky than a small cap international fund. I view active management as riskier because they are trying to beat the underlying index, which has a low probability. With active management you also have to deal with style drift.

Does your new 401k have the Spartan index funds? Like a Spartan S&P 500, Spartan International, and a Spartan US bond index? Those are fine funds, comparable to Vanguard, you won't need anything else.

 

+1 on index funds.

One step further the Target Retirement funds where you choose the fund that closest matches your expected retirement year are the latest spin on index funds.

They are essentially a fund that is an assortment of already available index funds that places high stock portfolio while retirement is a long ways away and then moves from higher risk to lower risk index funds as retirement approaches.

 

Most people use them this way, however I suggest you pick the one that is closest the assets allocation you have set in your personal investment policy statment.

 

What are the tickers of the funds you currently hold. If they are vanguard funds than they are more than likely index funds.

Index funds are not more riskier than active managed funds.

An index fund is owning a little bit of everything.

An active managed fund is a broker speculating certain things to happen to certain stocks so he buys and sells when he thinks is best.

Index funds statistically have a better chance of out performing active managed funds.