Why All Investors — Even the President — Should Consider Index Funds

Better Investing

What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Morningstar says investors are fleeing actively managed mutual funds. Understanding the trend might be the key to retiring comfortably.

In the midst of a record-breaking stock market run, investors continued shifting money from actively managed mutual funds to passively managed funds last month.

Morningstar refers to it as a “massive exodus” in a recent report on asset flows.

Actively managed U.S. stock funds saw $20.8 billion in outflow in January, according to the report. Over the same period, passively managed U.S. stock funds — also known as stock index funds — saw $30.6 billion in inflow.

Vanguard founder John Bogle recently referred to this trend as “a tidal shift to index funds — actually, more like a tsunami.” He notes in the New York Times:

“Since 2008, mutual fund investors have liquidated more than $800 billion of their holdings in actively managed equity mutual funds and purchased about $1.8 trillion of equity index funds.”

So it should come as no surprise that even President Donald J. Trump would be worth $10 billion more if he had invested in index funds instead of real estate.

We here at Money Talks News were not surprised by the latest news about index funds. Our founder, Stacy Johnson, has been educating readers about the value of index funds for years.

Why index funds?

An index fund is a type of mutual fund — a pool of investments like stocks or bonds — that mimics the performance of a particular group of stocks or bonds. The Vanguard 500 Index Fund, for example, mimics the performance of Standard & Poor’s 500 stock index.

Because they simply try to mimic an index’s performance, index funds are generally managed by computers. Thus they are generally cheaper than actively managed mutual funds run by a flesh-and-blood portfolio manager who tries to outperform an index.

By cheaper, I mean that index funds have lower fees, which means more money in your nest egg.

Consider this example we reported in “Of All the Fees You Pay, This One Is the Worst“:

Assume you have a current retirement fund account balance of $25,000. If returns over the next 35 years average 7 percent — even if you don’t contribute another penny to your account — you’d have $227,000 after 35 years if your account fees were 0.5 percent.

However, you’d only have $163,000 if your fees were 1.5 percent. That amounts to $64,000 less to live on in retirement.

To learn more about index funds and what they can do for your retirement portfolio, also check out:

What’s your take on active versus passive investments? Share your thoughts below or on Facebook.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: 30 Awesome Things to Do in Retirement

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,960 more deals!