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The Money Guy Show

Index Funds vs. Actively Managed Funds: Are You Making a Mistake?

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

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