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Questions tagged [index-fund]

to be used for any questions related to Index funds. The question should clearly state the Index in question [Nasdaq,LSE] or the fund house in question. If the question is generic with the intention to understand how the funds work, then a specific example should be quoted to get a better answer.

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If low-cost index funds are considered the best investment, why are there so many high-cost, managed funds?

The general consensus is that the single best indicator of a fund's future performance is the its expense ratio (source). If you look for more than 5 minutes online you discover the Bogleheads ...
Dang Khoa's user avatar
  • 540
38 votes
11 answers
12k views

Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

Whereas companies like Google, Facebook, Netflix, Amazon, Apple have all increased anywhere from 3x-6x in value in the past 5 years. If you just stuck with those companies, you would have easily ...
Eric Gumba's user avatar
6 votes
4 answers
4k views

Investing in low cost index fund -- does the timing matter?

I'm a young person with some money to start investing. I do believe in the superiority of low cost index fund over actively managed fund. But I still freeze up a bit about the timing of when to start ...
Heisenberg's user avatar
4 votes
1 answer
668 views

Understanding how an ETF works

I am trying to fully understand how ETFs work. For the sake of simplicity, let us restrict ourselves to physical replica ETFs. Let us suppose that an ETF follows an index which tracks three stocks: ...
D1X's user avatar
  • 271
1 vote
2 answers
1k views

How are ETF prices calculated after the market is closed

For example: Because the NASDAQ: DAX is tracking the index INDEXDB: DAX should its trading value be completely flat when the market the markets are open in the US, but closed in Germany? I'm not ...
jlansey's user avatar
  • 113
24 votes
3 answers
2k views

What differentiates index funds and ETFs?

Many companies offer index funds and ETFs. If two funds or ETFs track the same fund, what differentiates the two? Is it common for one index fund to outperform another? How can this happen if the ...
Ryan Michela's user avatar
  • 1,299
17 votes
5 answers
2k views

Is there any benefit to investing in an index fund?

Does an index fund comprise of stocks that mimic the index? So when the index is altered to include new players/exclude old ones, the fund also adjusts? But how can this be, since index funds are not ...
Victor123's user avatar
  • 16k
65 votes
10 answers
18k views

Are Index Funds really as good as "experts" claim?

I use the quotations because generally the people touting these the most (John Bogle) are also ones selling the index funds. Being biased doesn't mean they're wrong, but it does mean they may not be ...
dcg1000's user avatar
  • 661
15 votes
4 answers
2k views

Why would I want a diversified portfolio, versus throwing my investments into an index fund?

Index funds are well-known to give the best long-term investment. However, most financial planners recommend having a diversified portfolio, including components such as bonds and foreign markets. I ...
Bigbio2002's user avatar
  • 1,299
13 votes
2 answers
2k views

Why is the expense ratio of an index fund sometimes higher than its equivalent ETF?

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)'s expense ratio is 0.14% whereas VTI, its equivalent ETF, has an expense ratio of 0.03%. Why is the expense ratio of an index fund ...
Franck Dernoncourt's user avatar
3 votes
2 answers
712 views

How to chose index funds, mutual funds from a plethora of options (TD Ameritrade)

I recently rolled over an IRA had to select how to divvy up my portfolio and choose securities. I largely stuck with index funds but I have to be honest I wasn't exactly sure what I was doing/choosing....
gwar9's user avatar
  • 469
72 votes
6 answers
9k views

At what point do index funds become unreliable?

Passively investing in exchange-traded funds that track some broad index is often recommended for private investors that don't have the time or expertise for active investment. In particular, index ...
henning no longer feeds AI's user avatar
11 votes
1 answer
2k views

First time investor wanting to invest in index funds especially Vanguard

I am a first time investor. I would like to invest small and gradually build up depending on how I fare in the stock market. I've been following the stock market for a couple of years and have read up ...
Gabbar's user avatar
  • 523
11 votes
2 answers
1k views

Assessing the value of an ETF

I recently read through Graham's The Intelligent Investor and am looking at what index ETFs or Index Mutual Funds it makes sense for me to invest in. As I was considering this I realized that, at ...
vossad01's user avatar
  • 233
10 votes
5 answers
2k views

More money towards down payment versus long-term investments

Background: I am married with no kids (but anticipating them at some point) and no debt at all. My spouse and I have an emergency fund, both fully fund our retirement accounts, and are also keenly ...
justkt's user avatar
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8 votes
1 answer
577 views

Can an ETF perform differently than its holdings?

A mutual fund is just a portfolio of stocks (or other assets) and hence the fund performs as well as its holdings [minus various fees]. However, an exchange traded fund (ETF) performs, like a stock, ...
WetlabStudent's user avatar
7 votes
4 answers
22k views

How often do the S&P 500 components change?

And do index funds such as SPY and VOO usually rebalance immediately to reflect the change?
Nico's user avatar
  • 457
5 votes
4 answers
911 views

What is the average long-term annualized return on investments?

I've heard the number 7% thrown around a bunch of times, but I am struggling to find reputable data to back it up. All I found was a quote from Warren Buffet that I couldn't find an original source ...
nCardot's user avatar
  • 663
5 votes
2 answers
4k views

Who determines, and how, the composition of the S&P 500 index?

I thought S&P 500 would contain the top 500 U.S. companies by market cap, but apparently that is not the case? e.g., Facebook (FB) was only recently added and has market cap of $100B whereas ...
morpheus's user avatar
  • 953
5 votes
4 answers
1k views

Senior in College, need advice on my investing plan

I am a rising senior in college and saved up $3,000 dollars from my summer internship. I have done a lot of research online about investment options for my age and I decided that opening a Roth IRA ...
user2510809's user avatar
4 votes
1 answer
1k views

Should returns from my S&P Index fund (SWPPX) match the S&P 500 index?

I have been purchasing ~ $300 worth of SWPPX twice per month since March 2015. My annualized return appears to be 8.22%. I used the annual returns for the S&P500 from here: https://ycharts.com/...
Joe_P's user avatar
  • 43
4 votes
1 answer
866 views

What is the difference between shares and ETF?

For example, I see that this: Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX) is Also available as an ETF and at a lower cost as an Admiral™ Shares mutual fund What is the ...
Roger's user avatar
  • 41
3 votes
2 answers
550 views

How can I lever up my index fund returns?

Suppose I am very confident that the 1 year and 5 year returns of an index-tracking ETF will be positive. How can I lever up the returns? For example, when the ETF increases by 5%, how can I achieve ...
Flux's user avatar
  • 17.1k
3 votes
4 answers
538 views

What to move investments to before a crash?

Assume that I'm being very pessimistic and that I'm assuming that the stock market rush leading up to the 1928 crash is a predictor of a similar major "correction" coming for the current 2018 market. ...
Alex Reynolds's user avatar
1 vote
5 answers
299 views

How do I choose one fund over another if "past performance does not indicate future performance"?

I want to grow my capital by investing in funds (e.g. exchange-traded funds, mutual funds). However, I always see this disclaimer: "past performance does not indicate future performance" (or ...
Flux's user avatar
  • 17.1k
0 votes
1 answer
183 views

How come none of the VIX ETFs track the index exactly? [duplicate]

For example the VXX ETF (https://finance.yahoo.com/quote/VXX) does not track the index exactly (https://finance.yahoo.com/quote/%5EVIX/)
JDK's user avatar
  • 55
40 votes
7 answers
6k views

Why don’t index-tracking mutual funds corner themselves?

I don't really want to think too much about investments -- just park my surplus money somewhere and be able to come back several years later and see that it has grown. (As this question shows, I'm ...
hmakholm left over Monica's user avatar
22 votes
9 answers
5k views

Why do banks give small APR loans

I apologize if this has been asked before.... If you can reasonably expect to profit 6% or more from index funds and there are other ways to make a reasonably safe 6% on the stock market.... Why do ...
xyious's user avatar
  • 2,778
18 votes
3 answers
30k views

How does dividend work in an index fund?

What does a manager do with the dividends of the companies in the index? Does he reinvest the dividends in the company in which he got the dividends or will just choose whichever company suits him? ...
Louis's user avatar
  • 303
15 votes
1 answer
10k views

How do euro hedged index funds work?

I was trying to find a S&P 500 tracking fund and came across this one. db x-trackers S&P 500 Euro Hedged Index UCITS ETF. Can anyone explain what the Euro hedging means and how it is supposed ...
Roberto Fugazza's user avatar
11 votes
8 answers
2k views

Is Bogleheadism (index fund investing) dead?

I've always been a believer in index funds, and lately have been reading books such as The Coffee House Investor and The Lazy Person's Guide to Investing. It all makes sense to me except that the S&...
roufamatic's user avatar
11 votes
3 answers
7k views

Why index funds have different prices?

When index funds track the same index, why then do they have different prices? For example, I see a large difference between Vanguard, Fidelity, and Schwab index funds when they all track, for example,...
Rohit's user avatar
  • 305
11 votes
4 answers
1k views

Is an index fund a good choice for a starter investment?

As an individual that is willing to consistently invest ~100-150 dollars monthly into an investment, willing to devote an average of an hour a day to educate himself / monitor investments, what kinds ...
Victor123's user avatar
  • 16k
9 votes
2 answers
689 views

Invest in low cost small cap index funds when saving towards retirement?

This is a question about "Personal investing and asset allocation". About me: I earn more than I spend I may retire in 15 or 20 years, and I have savings to be invested in something or managed ...
ChrisW's user avatar
  • 1,063
8 votes
3 answers
937 views

Where are Bogleheadian World ETFs or Index funds?

The term bogleheadian is a bit ambiguous term but its simplification means low-cost, diversified, tax-efficient -- solutions. The slant is ETFs or index funds. William Bernstein wrote in some of his ...
8 votes
2 answers
1k views

Do physical ETFs possess the same problems as CDOs?

Today Michael Burry explained to Bloomberg that ETFs are comparible to subprime CDOs, in that investors are buying securities that aren't backed by any real value: Passive investing has removed ...
Lawrence Wagerfield's user avatar
8 votes
4 answers
567 views

Index funds and finite supply of stock

As more money pours into index funds, those index funds need to purchase more shares of stock which are part of the index being tracked. Is it possible that an index fund will be unable to track an ...
jayflo's user avatar
  • 181
6 votes
2 answers
1k views

Income vs growth securities in a downturn

It's generally accepted that "income (dividends) and growth (capital gains) are perfect substitutes (tax and transaction costs aside)". i.e. "In financial theory, there is no reason for a difference ...
Max's user avatar
  • 165
6 votes
4 answers
6k views

What is the easiest way to back-test index funds and ETFs?

Some authors are irritating such as Stein, more here, they keep throwing people all kind of new "investing" strategies and different ideas after their last ideas stopped working. I feel such authors ...
JP.'s user avatar
  • 620
5 votes
3 answers
211 views

Do you micro-manage index fund purchases to a particular day of the month?

I have setup automatic withdrawal with my brokerage to purchase shares of an S&P500 Index fund the 8th of every month. When I first caught wind of the USA credit downgrade Saturday morning, I ...
Pete's user avatar
  • 653
5 votes
2 answers
890 views

What factors should I consider when evaluating index funds?

Thanks to the people who answered in this question, I've decided to educate myself with index funds and to engage my mortgage preparation funds in them. There are several choices for index funds. ...
Zaenille's user avatar
  • 4,334
5 votes
1 answer
3k views

Where can I find P/E and CAPE data for different sectors, countries and market capitalizations [closed]

I've been searching for high-quality data on CAPEs (cyclically adjusted price to earnings ratios) for different sectors, countries and market capitalizations. Shiller's Irrational Exuberance website ...
Powers's user avatar
  • 938
5 votes
4 answers
518 views

Is every active fund bad?

My father (who actually is in banking) recommended me an active fond (https://www.finanzen.net/fonds/deka-globalchampions) in which I invest since some quite some time monthly as long-term investment. ...
baxbear's user avatar
  • 153
4 votes
1 answer
347 views

How can passive index funds be sustainable at large scale? Won't they affect the indexes they are tracking?

Index funds seem to be gaining popularity these days. So if this trend continues, a sizable amount of investment money might end up in these passive funds. When this happens, won't there be a ...
cgg's user avatar
  • 173
4 votes
3 answers
237 views

What "failure modes" for passive, large index funds?

Is there a way that a passive, large, liquid index fund can completely devalue due to some mechanism (as longs as the stocks it is tracking do not, obviously)? For example, any individual stock can ...
AnoE's user avatar
  • 827
4 votes
1 answer
502 views

Investment Portfolio Setup for beginner

I am new to investing but want to start soon, after being able to save some money and doing some research for the past few days. Here are some basic info about myself and my goals: Mid twenties Only ...
justWired's user avatar
  • 125
4 votes
2 answers
250 views

Are index fund expense ratios "priced in"?

I'm coming from a Robinhood "day trading" mentality, so I'm used to public advantages being "priced in", more or less. It seems like many people pick index funds based on their expense ratio. I would ...
bitmaker's user avatar
  • 358
4 votes
4 answers
527 views

Why are typical 401(k) plan fund choices so awful?

I don't expect a huge number of funds to choose from in a 401k plan, but all the plans I've ever seen are loaded with funds that have outrageously high management expense ratios (MERs) and they ...
bstpierre's user avatar
  • 10k
3 votes
2 answers
2k views

When to start investing in an index fund? Wait for a bear market, use dollar cost-averaging, or another approach?

I think index funds are one of the best investment tools for the defensive investor. Still, when should one start investing money in an index fund? It could result in a loss to get in at the top of a ...
oldergod's user avatar
  • 195
3 votes
5 answers
3k views

Why invest in IRA while a low-cost index fund is much simpler?

I'm currently investing in a low-cost index fund and wonder what's the point of opening an IRA (either Roth or traditional). The big con of IRA is that you can't withdraw before retirement age ...
Heisenberg's user avatar