Advantage of Index funds
Did you know how you can get benefits with Index funds. Be using index funds you will get much more advantage. Index funds hold each stock in a given index in the same percentage as the proportion is represented in the index. For example, if the shares of Y, which represents 3% of an index, an index fund will be 3% of their funds invested in equities Y.
Some investors avoid index funds because they are not satisfied with the "average" as a return, but they usually change their opinions when they are aware of the advantages of index funds.
Cost reduction - An index fund does not incur research costs, or high salaries and bonuses paid to directors of some of the funds assets. This is most index funds are about 0.50% cheaper than actively managed funds.
Tax share of efficiency tend to be in an index for a very long time, which means that index funds also hold stocks for a very long time. Compare that with a fund manager assets, whose principal aim is to have the best overall rate as possible to attract new funds. Little concern is given to the investor's tax situation and it is not uncommon for fund asset returns of 100% of its portfolio each year.
Diversification - Because index funds invest in all or most of the shares of an index, providing a greater degree of fund managers and asset diversification. This greater diversification allows an investor to reduce risk, including the unsystematic risk. Of course it is always an average return of the stock market, regardless of investment styles, and those that exceed the average return is made at the expense of which are managed in an average return. Therefore, we know that, before expenses, the average return of an actively managed fund will normally equal the return of the market size, ie the average index fund. Since index funds have lower fees it is certain that the premiums after the average index fund always better than the average fund assets.
Therefore an investor in index funds can be sure they will do better managers of active funds on average, after expenses, and never under-performing fund managers on average assets. Stock markets move in cycles, and in bull markets funds managed with a slope of growth do better, but the bear market in general better than value funds. While in a given year, some fund managers will be more effective than active index funds, it is very rare that these results should be pursued in subsequent years.