0
For decades it’s been known that index funds such as the S&P 500 outperform the vast majority of actively managed mutual funds picking stocks.
Wall Street’s algorithms finally noticed and now vast amounts of money have moved into index funds and they continue to do so at an increasing volume.
A recent report from Bank of America showed that Franklin – the largest operator of index funds – owns at least 5% of 490 companies in the S&P 500 compared to about one quarter or 119 companies seven years ago.
The trend is your friend when it comes to Wall Street and that is why even larger amounts of money are heading into index funds which now account for about half of the stock market.
Profitless picking…
It is called called passive investing because it requires no stock picking or timing of markets. It does not matter if any of the index stocks are in trouble because they will be bought along with the winners – a rising tide lifts all boats.
The Index funds’ lack of management involvement means it has very low fees and the money always matches market performance – which the vast majority of stock picking mutual fund managers cannot do on a consistent basis.