When you invest in funds, knowing the different stock market indexes is key to building a portfolio and tracking its performance. There are two basic reasons why you should know what each index measures:
- to know how an index fund invests
- to make a performance comparison
This is because you’re either invested in index funds or picking mutual funds that try to beat an index.
The first point is fairly straight forward. To better understand how an index fund works, just research the index it tracks.
The index tells you the type of stocks in the fund and how the fund invests based on the rules laid out. Just knowing those two things should give you a good idea if it fits in your portfolio or not. Continue Reading…