Index Funds is not same with stockSome people may guess that index fund is similar to stock. They think that Index fund can give higher return like investing in stock. Index fund invest not only stock but also bond. Bond index that include treasury bond, corporate bond, mortgage-backed bonds, and so on is less popular than stock index. By investing in index, you diversify your money to numerous company. You should also pay some fee for funds too. The critics of mutual fund is that the manager cannot beat the market. Some manager also cannot beat the market. Perhaps they cannot construct a good portfolio. The Bond Fund expected return usually is lower than Stock Fund. It is because the expected return of stock is higher than the expected return of bond.
Why Invets at Index FundI remember that Warren Buffet has suggest to invest at index fund. This investment will give you high return if the economic condition is good. On the other hand, we can suffer loss if the economic is bad. Second reason is lowest fee. The average of index fund fee is lower than other mutual fund. For example, the average of mutual fund fee could reach 2% but the index fund is just 0.5%. Many investor does not belive the performance of fund manager. In 1990s, the average of mutual fund return yearly just 12.9% but the index fund could reach 17.3%.