Index Funds – Explained – Apollo Investment Management
Industry: Financial Services
An index fund is basically a type of mutual fund that essentially tracks an index as opposed to paying a manager to pick and choose investments. In other words, it is a mutual fund or ETF (Exchange-traded fund) formulated to abide by certain preset rules in order for the fund to track a selected basket of underlying investments.
London, UK (PRUnderground) November 11th, 2019
The main advantage of index funds is that they tend to cost relatively less because they technically don’t have that active manager on the payroll although the risk associated with an index fund will entirely rely on the investments within the fund.
Index funds may reap interest or dividends, which is then distributed to investors. These funds may essentially go up in value when the benchmark indexes they track rise in value; investors can then sell their share in the fund for a profit. Index funds also charge expense ratios, but as mentioned above, these costs may tend to be lower as compared to mutual fund fees.
As a matter of fact, an index fund is an investment fund that aims to recreate the performance of a given index of stocks or most probably other types of investment which essentially includes bonds etc
Investment in Index Funds –
Index funds are gaining popularity and for all the good reasons. To begin with, since index funds does not require a lot of effort from managers, they basically have lower fees when compared to actively managed funds. Having said that, it’s not uncommon to find index funds with expense ratios in the 0.05%-0.07% estimate, as opposed to actively managed funds that are mostly in the 1%-2% projection.
In addition to that, index funds allow investors to effectively utilise the long-term potential of the stock market without the guesswork and research involved with selecting specific individual stocks. Moreover, there are quite many economists who firmly believe in the efficient market hypothesis — which essentially says that it’s not possible to beat the market on a consistent basis, so the efficient technique to invest is to basically buy all stocks. An index fund allows investors to do that.
Apollo Investment Management is an investment firm serving clients in the United Kingdom, providing transparent financial advice with integrity and a deep understanding of market realities.
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About Apollo Investment Management
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