Want to Retire with More Money? The Case for Index Funds.
Yahoo Finance ·
Index funds offer a simple and cost-effective way to build wealth. If they don't play a significant role in your overall portfolio, you may want to take a closer look at what a good index fund can do for you. An index fund is an exchange-traded fund (ETF), or mutual fund that aims to replicate a market index, such as the Nasdaq . Rather than trying to pick only winners, an index fund buys most or all of the securities in the index it tracks, holding them in the same proportions as the index. One of the strongest arguments for investing in index funds is their expense ratio. The reason active funds tend to have higher expense ratios is that they incur costs for research, trading, and analysis. In contrast, index funds can operate efficiently because their portfolios change only when the indexes they track change. Those low costs result in compounding in your account over time and allow you to keep more of the market's returns rather than letting fees slowly erode them.
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