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Indexing - Online Essay

Indexing


The first index fund began in 1971, with $6 million funded by Samsonite, the luggage-maker. Since then, there have been many arguments of whether an active index fund or a passive index fund offers better long-term results for investors.
Index funds are already the fastest growing sector of the mutual fund business. From 1986 to 1996, the amount of money invested in index funds grew from $556 million to $65 Billion. And if anything, individual investors have been slow to embrace passive management. Institutional investors invest a far larger percentage of their assets passively.
Many individual investors are simply uneducated and unaware of the arguments and experimental evidence ...

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while passive indexers remain fully invested. This can be quite painful during times of large declines in the market.
Passive portfolios mirror the gains of the indices during roaring bull markets and eventually outperform the majority of active money managers who must remain diversified and who sometimes take on additional risks in an attempt to produce the performance and safety that they have promised their clients. The evidence has piled up during today's bull market that the average dollar managed by active managers does not keep up with the market index. Finally, is a way to avoid being blind-sided in certain areas of the marketplace. Active management themes can easily find themselves on the wrong side of an investment. There is a perception among investors that a strategy designed to match stock market returns is less risky than a comparable actively managed portfolio. Since the index approach invests in a manner that is most friendly with the market's natural ...

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of when to buy and when to sell. Index investing is a tricky business that can roil markets.
Actively indexed funds have gone upward over the last decade. This has occurred despite the fact that investors have poured huge amounts of money into active funds over this period. The costs of investing in index funds have trended downward as they have become more popular with investors.
The costs of active index funds just might decrease in the future, thereby narrowing the cost gap with passive index funds. But all evidence to date has shown just the opposite trend - the costs of active funds continue to go up and the costs of index funds continue to go down.
Actively indexed funds ...

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Indexing. (2005, September 27). Retrieved December 23, 2024, from http://www.essayworld.com/essays/Indexing/34005
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"Indexing." Essayworld.com. September 27, 2005. Accessed December 23, 2024. http://www.essayworld.com/essays/Indexing/34005.
"Indexing." Essayworld.com. September 27, 2005. Accessed December 23, 2024. http://www.essayworld.com/essays/Indexing/34005.
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PAPER DETAILS
Added: 9/27/2005 09:18:48 PM
Category: Miscellaneous
Type: Premium Paper
Words: 1301
Pages: 5

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