Fund managers are great about touting their achievements and market-beating returns. However, when they can't even keep pace with an index, they suddenly grow silent. Mutual fund investors looking to get the most for their money would be wise to ignore actively managed funds entirely and build a well-diversified portfolio constructed of low-cost index funds.
What are Index Funds?
Index funds are mutual funds that track a specific index or set of guidelines. Rather than trying to beat the index, the fund simply mimics it by purchasing all of the securities in the same proportion as the index it is tracking. Index funds can track a plethora of indices, including Standard & Poor's 500 or the Lehman Aggregate Bond Index, and strategies based on specific criteria, such as dividends or earnings.
