April 23, 2009

Passive vs. Active

Barrington’s Blog » 2009 » April: "Did you know that actively managed funds (i.e. mutual funds, your 401k, or 529 plans) underperforms an index fund on average? The money you contribute to your company’s 401k program or mutual fund is managed by some portfolio manager who’s guessing and gambling in his/her best efforts to beat the market - however, history tells us that these managers hardly ever beat the market at all. Yet, they charge us monthly fees and take a percentage of any profits recognized - for poor performance!
So as an alternative - why not take your money and passively invest in Index funds? Index funds are portfolios of stocks that mimic or benchmark the market, such as SPDR. By investing in an index fund you are outperforming most actively managed funds, not charged any management fees, and you get to keep all of your profits that your fund recognizes. Sounds like a winner to me….!
Investing in an Index fund is the best way for an individual who does not have all of the resources or time to research the stock market, but wants to still have their money grow at a decent percentage over time.
Let’s make our money work hard!

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