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Financial Literacy

Financial Literacy

Home Financial Literacy Investing 101 What is an Index Fund?

What is an Index Fund?

An index fund is just a big fat basket of stocks or bonds geared to reflect a market “strategy” (i.e. whatever logic that consumers will buy). If you believed in sin doing well over time, you might try to find an index with tobacco, alcohol, gun sales, porn, and gambling. The more generic funds are those baskets that reflect a popular index like NASDAQ or the S&P 500 or the Dow. Here’s the composition of the Dow which are 30 big fat cap industrials that are supposed to reflect the industrial strength of this country and the world (you have probably heard of a few):

Alcoa
American Express
Boeing
Bank of America
Caterpillar
Cisco
Chevron
EI DuPont
Walt Disney
General Electric
Home Depot
Hewlett-Packard
IBM
Intel
Johnson & Johnson
JP Morgan
Kraft
Coca-Cola
McDonald’s
3M
Merck
Microsoft
Pfizer
Procter & Gamble
AT&T
Travelers
United Technologies
Verizon
Wal-Mart
Exxon Mobil

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