Iowa Insurance Division Iowa State University Extension Investor Protection Trust


Index funds may be for you

Radio Transcript, 60 seconds, for use during week of Dec. 3.

This is an Invest Wisely minute brought to you by Iowa State University Extension.

When investing, many individuals prefer index mutual funds.  An index fund tracks a particular group of stocks, for example the S&P 500 is made up of large companies.. .the Russell 2000 Index of small companies.  An index fund gets the same returns as the index it tracks minus the annual cost of running the fund. 

And with an index fund you don’t need the time, skill, or money needed to diversify among the stocks of individual companies.

Generally expenses are low because there is no need for analysts to buy or sell securities.  Historically, index mutual funds have a lower expense ratio than the average managed mutual fund.

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Updated December 3, 2007