Don't Be Misled: Common Myths About Index Funds Debunked
Index funds can be an excellent wealth-building tool. However, not buying into these myths may help you avoid mistakes.
Overview
Index funds are designed to replicate the performance of a specific market index, such as the S&P 500. They work by pooling money from multiple investors to purchase a diversified portfolio that mirrors the composition of the index it's tracking.
It's typically a passive investment that offers lower management fees than actively managed funds. Best of all, some funds -- like the Schwab S&P 500 Index Fund -- provide investors with broad market exposure, reducing portfolio risk through diversification.
Details
As simple as the strategy is, there are common myths surrounding even the safest index fund investments -- falsehoods that could affect how you invest and whether you make the most of those investments. Here are three of the most common myths.
Source
Originally published at www.fool.com.