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Mutual Funds vs. Index Funds

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 hor...

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