Index funds monitor a specific benchmark's or index's performance.
Oct 13, 2022
By- Rajendra
Image Credit- Unsplash
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Instead of actively selecting the stocks to build a portfolio, the fund manager simply invest in all the stocks that make up the index to be followed.
Image Credit- Unsplash
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Index fund's stock weighted average closely reflects the weighted average of each stock in the index.
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The fund management just copies the index while creating the fund's portfolio and seeks to keep the portfolio in sync with the index.
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The fund Manager copies the index while creating the Portfolio & seeks to keep the portfolio in sync with the index.
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Due to tracking error, the fund usually does not deliver returns that are equal to those of the index.
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For those who don't want to invest in mutual funds or individual stocks because of risk involved, index funds are the best option.
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John Jack Bogle introduced Index Funds in 1976. A pioneering index fund, Vanguard 500 Index Fund tracked S&P 500 Index.
Each index fund has a pre-selected assortment of hundreds or thousands of stocks, bonds, or occasionally both.
They don't have to spend extra money on the knowledge & time needed to hand-pick stocks or bonds for each fund.