Index Funds
Rules-based funds that track a market rather than trying to beat it.
Index funds buy the market in proportion to its size. Because there is no research team to pay for, costs stay very low.
Index funds buy the market in proportion to its size. Because there is no research team to pay for, costs stay very low.
The trade-off is that you accept the market's return — no more, no less — before fees.
Key concepts to master
- 01.Total cost of ownership, including fund fees and platform fees
- 02.Liquidity: when, and on what terms, you can get your money back
- 03.Tax treatment and which account type this belongs in
- 04.How this exposure overlaps with what you already own
Common mistakes
- ×Sizing a position based on recent performance rather than a written plan
- ×Confusing infrequent valuation with genuine stability
- ×Ignoring the tax drag of frequent trading in taxable accounts