Assets in passive equity strategies grew to nearly 45 percent of all stock market investments in the U.S., and active equity managers continue to lose ground due to the over $470 billion investors have invested in passive equity strategies like index funds.
There is good reason why index investing has an eager and growing participation. It is much cheaper than active management. But, are index funds better for your financial goals? The answer is yes, but with a footnote.
For anyone that has listened to our show for some time, you know that we are huge proponents of index investing. There are a lot of reasons to like index funds, but what is the difference between index investing and active management? And how can you use index funds to reach your financial aspirations? That’s what we cover in today’s episode of The Money Guy Show.
Here is what we cover in today’s episode:
- The data: How the cost and performance of index investing compares to active management
- What makes index investing so successful for investors
- How to understand expense ratio costs and the average price for both types of investments
- Why index funds are tax-efficient and what that looks like in real-life for investors who invest in them
- How to implement index funds into your investment strategy
- Why investors can consider Target Retirement Funds with a planned glide path
- At what point investors should consider something other than Target Retirement Funds
- When active management may make sense
Resources Mentioned in this Episode & Related Episodes
- Passive Investing Rises Still Higher, Morningstar Says (Institutional Investor)
- Trends in the Expenses and Fees of Funds, 2017 (ICI Research)
- Examples of Expense Ratio Costs
- #19 = Fidelity Contrafund (FCNTX) – expense ratio of .74%
- #21 = American Funds Growth Fund of America (AGTHX) – expense ratio of .62%
- #1 is Vanguard 500 Index Admiral Share VFIAX – expense ratio of .04%
- Financial Order of Operations: How to Prioritize Your Financial Goals (Money Guy Show)
- Zero-Fee Index Funds! Here’s What It Means for Your Wallet (Money Guy Show)
- Index Funds 101: How to Pick ‘Em (Money Guy Show)
Enjoy the Show?
- Make sure you subscribe so you get updates, announcements, and exclusive post-show deliverables!
- Leave us a review on iTunes
- Send us your questions or share your story!
- You can also use #AskTheMoneyGuy on social media!
- Get your FREE copy of The 30-Minute(ish) Financial Plan
Tune In and Go Beyond Common Sense with the Money Guys
This show would not be what it is today without the support of our wonderful listeners. We strive to continue making the show better and your feedback is an important part of that process.
If you have any questions/suggestions/comments/concerns (or just want to say hi!), feel free to reach out to us: [email protected] and [email protected]. You can also join the conversation on Facebook or connect on Twitter @MoneyGuyPodcast.
If you enjoyed this episode, be sure to join our community! You’ll never miss special announcements and offers, plus you’ll get future podcasts and blog posts delivered straight to your inbox so you can get in on the action right away.