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Mutual Funds vs. Index Funds

The biggest issue facing mutual funds is not the competition of other mutual funds – it is the increasing popularity of index funds. Index funds are passively managed, which means that they track an index, like the S&P 500. So, an index fund that tracks the S&P 500 would buy the companies that make up the S&P 500, in the same proportion, and sell shares based on that investment. Simple, cheap and what’s more, their returns tend to outperform actively-managed funds over a longer time horizon. ...

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