#5. What are index mutual funds?
Index mutual funds buy securities and hold them in an investment portfolio to represent an entire market like a benchmark. It is typically comprised of most or all of the stocks that make up a particular index, such as the S&P 500, with a goal of mimicking the returns of that index. Unlike traditional mutual funds that try and often fail to beat the benchmark, index mutual funds invest directly into the benchmark.
Index Mutual Fund Benefits
- Available at a much lower expense ratio than actively managed funds
- Offer lower risk through broader diversification
- Higher quality investments that could help lower long-term costs
It has been said that success in index mutual funds can be attributed to sticking to a simple formula and keeping down costs. Chernoff Diamond’s innovative 401(k) method is based on index mutual funds and managed accounts to lower plan fees and create better participant outcomes.
To learn more about index mutual funds and lower expense ratios, contact one of our consultants today at firstname.lastname@example.org.
Up Next in our Series: #6. What are managed accounts?
This information is intended for educational purposes only and should not be construed as an offer to buy or sell any product or strategy. You should contact your Financial Advisor with questions regarding your individual circumstance.