Quote:
Originally Posted by doreenjoy
Low cost also refers to the cost of managing the fund. Index funds have a wafer-thin management cost of 0.02%, while even the cheaper managed funds cost over 1%. That means that every year, you are charged 0.08% more (at least) simply for the dubious priviledge of being in the managed funds.
|
Using Ms. Doreenjoy's numbers, a managed fund at 1% load would have to gain 0.8% more return per year than a 0.2% load index fund just to equal the return from a fund that isn't really managed. Betting on 'the Man' or 'the Machine'?
To be fair, during very turbulent times (anyone think of any lately), the managed funds are better at adapting to rapid or unusal market forces.
I would have to agree with the other posters that Index Funds can be a useful addition to an investment portfolio for all but the full-time professional traders as long as they aren't the only item in the portfolio.