Index-based ETFs and index funds are popular choices for investors these days. The low costs and simplicity are a big selling points. Not to mention the fund marketing blitz reminding us how often actively managed funds fail to beat the S&P 500 index. But do you know how that underlying index works? Is it built to be a good investment strategy? Or should alternative index weighting methods be used?
A stock index is used to measure the performance of a group of stocks. To do this a weighting method is used, which puts more emphasis on weighting on stocks that meet specific criteria. In turn, those stocks represent a greater part of the index.
Since index funds are built to track a specific index, a fund uses the same weighting method on the stocks it owns.
Most of the major market indices are based on a market cap weighting. In the past few years, several fund companies started offering alternative weighted index funds. But it all started with a price-weighted index. Continue Reading…
We just ended the biggest instant gratification decade of our lives. Every financial borrowing tool was built to feed our immediate wants, if we paid for it later. Literally.
TurboTax is one of the most popular online tax preparation and filing services around. During tax season, it’s nice to use great tax software that makes finishing your return as quick and painless as possible.
The last-minute fiscal cliff deal made several changes to the tax code. Most of the new tax law focuses on the