Does Indexing Still Work?

Quinn, Jane Bryant; Ehrenfeld, Temma
September 2003
Newsweek;9/1/2003, Vol. 142 Issue 9, p39
Index mutual funds behave no better, but no worse, than any other mutual fund when the market falls. "Managed funds" are run by stock pickers who make bets on which stocks will do the best. But "index funds" run on autopilot, tracking the rise and fall of a particular market index. If index funds are a tossup, why bother to buy them? For three good reasons. First, index funds are low-cost, or should be. Second, index funds have an edge when the market first turns up. Third, there are always managed funds that beat the indexes over various periods of time. Basically, targeted index funds aren't a clever choice. To ease the cost problem, Vanguard now pegs seven of its targeted funds to indexes newly created by Morgan Stanley Capital International. As money returns to the market, relatively more is moving toward managed funds.


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