The growth and popularity of index investing has provided investors with a great opportunity to move their money away from higher cost mutual funds. However, low costs aren’t the only thing you need to consider these days.
When you drop the fund manager, you become the full-time decision maker for your investments. Done wrong, it opens the door to bad habits, confusion, comprehension risk, and losses. That’s never a good trade-off when discussing the benefits of index based funds, but it’s true.
For each index fund you own, you need to know the underlying index, what it measures, the asset makeup, how the index is weighted, the risks, and finally the costs. It’s a lot to cover, but it all impacts your performance. What once was a simple comparison tool has evolved into a complex investing strategy. Continue Reading…