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      02-06-2013, 10:28 PM   #1
BMWFB02
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Index fund vs mutual fund

For the experts in here, I have a question, I'm trying to start investing, I'm looking at an index fund with vanguard, ill start with S&P 500. I don't have enough time to keep up with the stock market and manage stocks personally. So I heard and read a lot about index funds being better than mutual funds. What do you guys think?
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      02-06-2013, 11:02 PM   #2
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Depends on your risk tolerance and goals.
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      02-06-2013, 11:56 PM   #3
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Index beats actively managed funds 90% of the time. Tough to beat index yourself or find the 10% or less that do.
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      02-06-2013, 11:59 PM   #4
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It is really based on one's level of risk tolerance and situation including age, number of years to retirement, and the like.

Index funds are a type of mutual fund which mimics an index. So if you buy shares of the S&P500 Index Fund with Vanguard (who are known to have some of, if not THE, lowest fees in the business, at least last time I checked), you essentially are buying a portion of a share of every company represented by that index with each share of the fund.

Indexes are widely followed so you always have a sense of where you're at - you turn on the news and you see Dow Jones, S&P500, NASDAQ, etc. numbers all the time; as the index moves up, so do your shares, and vice versa; On the other hand, "regular" mutual funds will have a specific sector or set of companies that the fund managers prefer to invest in.

The general idea is that index funds are more diverse and more long-term. You can look at the history of the S&P500 (although history does not indicate future performance, of course) and see how it has performed over decades and see if that sort of return over 5, 10, 20, 40, etc. years would have been beneficial to you, hypothetically speaking.

One thing to note is fund fees. Vanguard is known to have low fees for the management of their Index funds. This is important, because as you continue to invest, and reinvest dividents, lower fund fees will not eat into your earnings and ability to build up as much as with other funds.

Make sure to read or at least peruse the prospectus of any fund you are considering investing in, even if you're comparing an index fund offered by one company vs. another, because fees will be different. For the more risky funds, it's a good idea to have some knowledge and understanding of the particular sector that fund tends to invest heavily in, as that can help you to determine your level of willingness to take risks based on a more educated opinion rather than "this fund has done well over the past N years so it must be good".
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      02-07-2013, 12:58 AM   #5
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Thanks for the replies guys..
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      02-07-2013, 01:44 AM   #6
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Quote:
Originally Posted by JetFalcon
You could probably get some great advice in the Lamborghini forums as well. They probably got more money than anyone on an M3 forum and probably could make you a millionaire.

You never hear a guy at any of those get rich quick companies talk about M3, they're talking about the Lambos and Ferraris.
pple on the M3 forums also worked their ass off to earn every penny because if they inherited the money like the lambos and Ferraris guys did they would have bought a lambo or a Ferrari and they probably not gonna be looking where to invest it coz its too much they don't care.
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      02-07-2013, 08:32 AM   #7
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      02-07-2013, 09:24 AM   #8
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Quote:
Originally Posted by JetFalcon View Post
Come on, get over yourself, it was just a joke. Are you so into your M3 like if it was part of your identity or a family member? In the end, it's just a car. If someone said my orange M3 looks ugly, I could care less because I'm driving for it's performance, not to be seen in it. And the guy is probably a hater who critiques on other people's property.

But I wonder if the people on the Lambo/Ferrari forums would envy the M3 users because they paid less. Or maybe they hate on the Bugatti owners since those cars are like a million dollars.
Huh?

Again it's not your M3, it's your daddy's...

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      02-07-2013, 01:13 PM   #9
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Quote:
Originally Posted by BMWFB02 View Post
For the experts in here, I have a question, I'm trying to start investing, I'm looking at an index fund with vanguard, ill start with S&P 500. I don't have enough time to keep up with the stock market and manage stocks personally. So I heard and read a lot about index funds being better than mutual funds. What do you guys think?
Not to pick on you, but honestly this is probably the most important thing you should spend about an hour a week on. Why because everyone who has ever said what you said we always surprised to find out they do not have as much money as they hope or though when they finally do check to see what is going on with their investments. It is like buying an investment property and never visiting it to see what you tenets are doing to it, only to find out they burned it down.

Others already point this out, it comes down to your risk level. I personally do not go into an index fund, not interested in making the average the total market delivers. When you look is are only a few good investment driving the average, if you focus on them you beat the average. So I have straight stocks, some focus mutual funds to spread the risk. I stay way from Bonds, not interested in financing bad spending decisions by our governments.

I also have REAs which kicks out some really nice dividend, it like owning real estate without having to deal with tenets and worrying about them burning down your property.

I do not have lots of time, but I have some amount of time to keep an eye on my money. My returns have been better then an index fund has returned
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      02-07-2013, 01:16 PM   #10
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consider etfs
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