Draper
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It really depends on what your long-term objective is because there are indexes against which funds are measured & invested.
If you're looking for the most long-term growth you should look at an International Index.
If you're looking for preservation of your investment you should look at a Bond Index.
If you're looking to invest in the US market, any S&P 500 index will do.
You can even get specialized. Steward Funds, for example, has a S&P 500 index fund that screens out companies that make the bulk of their money from things like tobacco & pornography (meaning Phillip Morris won't be in your portfolio even though it is in the S&P 500).
When it comes to an Index Fund -- all funds invest in the exact same thing (with exception for things like Steward Funds) so the ONLY thing you'll want to look at is the management fee. Vanguard and T. Rowe Price have some of the lowest fees across the board but you'll need to look fund-to-fund to be sure. |
hatethejones
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Depending on whether or not you will be continuing to add to the index fund, will put you down two different paths. If you plan to add to the fund, go with an index mutual fund. If you are simply doing one transaction, go with an ETF. This is because ETFs usually carry some kind of transaction charge whereas no-load mutual funds do not.
As for mutual funds, be sure to read the prospectus thoroughly as many index funds are comprised of mostly index and some "over allocations" to stocks within the index at the manager's discretion. This can lead to some variance from the index return.
Either way you go, pay attention to expenses. If you're simply buying the index, go with the lowest cost available. A quick search at morningstar.com will show that institutional share classes of popular index funds from Vanguard and Fidelity are inexpensive, but minimums are extremely high for an individual investor with anywhere from $100k to $1 million required to buy the funds. Try USAA, Fidelity, or Vanguard's retail versions.
By the way, did you know that the S&P 500 is weighted by capitalization, but if you invested equally in each of the companies over the last few decades, you would have significantly beaten the S&P 500? There are funds that follow this kind of strategy as well.
Personally, I hate indexing because top managers have outpaced their relevant indexes over time and those on the value tilt have also experienced less volatility compared to their growth or blend peers.
If you read up on the efficient market hypothesis, you'll begin to understand that indexing ONLY works in efficient markets--i.e. large cap domestic and fixed income. In small or mid caps as well as international and emerging markets, active management shows much better results.
Just do a Morningstar screener and it'll show you that the top performers over long periods of time are active managers.
Hope this helps and good luck! |
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