
How Purchases and Redemptions Impact Index Funds
Index funds are great product for investors who are looking for a diversified investment that mirrors a benchmark with a low-cost entry point.
Index funds, on the other hand, are designed to simply follow a benchmark. In this way, they are great vehicles for providing investors with exposure to a specific sector or market without veering too far off course pursuing above average returns. Index funds also tend to be a bit more transparent than active funds since their composition tends to change relatively little over time. Active fund managers have the ability to turn over significant chunks of their portfolios quickly. Many active funds only publish their holdings every quarter.
Be sure to also check out our Guide to the Turnover Ratio.
Other advantages of index funds:
Many index mutual funds offer additional flexibility by providing ETF counterparts. For example, Vanguard offers the Vanguard S&P 500 ETF along with the Vanguard 500 Index Fund. The advantage of an ETF is that it allows intraday trading, whereas most mutual funds price only once at the end of the day. Many ETFs also come with a lower expense ratio that their corresponding mutual fund.
For ETF alternatives to passively managed mutual funds, be sure to check out the Mutual Fund to ETF Converter tool on our sister site, ETFdb.com.
Ticker | AUM (Billions) | Expense Ratio | Stance |
---|---|---|---|
VTSAX | $560 | 0.04% | Seeks to invest in 100% of investable companies in the U.S. stock market. |
VFIAX | $316 | 0.04% | Seeks to replicate the performance of the S&P 500. |
VTIAX | $271 | 0.11% | Seeks to invest in companies located in developing and emerging markets outside the U.S. |
VBTLX | $180 | 0.05% | Seeks to provide broad exposure to the entire U.S. investment grade bond market. |
FUSVX | $119 | 0.05% | Seeks to replicate the performance of the S&P 500. |
Index funds are great product for investors who are looking for a diversified investment that mirrors a benchmark with a low-cost entry point.
Index funds are great product for investors who are looking for a diversified investment that mirrors a benchmark with a low-cost entry point.
The continued growth and popularity of index funds have made them the go-to investment of choice for many investors.
The continued growth and popularity of index funds have made them the go-to investment of choice for many investors.
Choosing the most suitable investment can be a confusing task.
Choosing the most suitable investment can be a confusing task.
Tipping Point in the Active Versus Passive Debate
Tipping Point in the Active Versus Passive Debate
Understanding this concept and how it relates to returns is vital for mutual fund investors.
Understanding this concept and how it relates to returns is vital for mutual fund investors.
This articles offers an introduction to enhanced index funds, highlighting their appeal and drawbacks.
This articles offers an introduction to enhanced index funds, highlighting their appeal and drawbacks.
We explain benchmarks and how they're used in the mutual fund world.
We explain benchmarks and how they're used in the mutual fund world.
Find out what these funds are, how they work, and benefits for investors.
Find out what these funds are, how they work, and benefits for investors.
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