Mutual Funds
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What are the benefits of index mutual funds?
Index funds have lower cost compared to actively managed funds. Index funds do less trading than actively
managed funds, so costs such as broker commissions are less. And management doesn’t devote time and energy
researching individual stocks or bonds, so management costs are lower.
The lower costs impact performance, since less money is taken out of the returns before they are passed on
to shareholders. What’s more, in many market environments, index funds are able outperform actively managed
funds. And because an index fund performs almost identically to the index it tracks, there are no surprises,
positive or negative.