From: PhaedrusWolf@aol.com
Date: Wed Nov 24 2004 - 00:12:09 GMT
In a message dated 11/23/04 5:27:55 PM Eastern Standard Time,
us@divadeus.freeserve.co.uk writes:
what's an index fund?
Sorry Bud,
I just left that kinda hanging out there; didn't I?
An index fund is a passively managed mutual fund that does not try to beat
the market returns, but from low management costs manages to match market
returns by investing in the market such as all stocks or all bonds. It is the
same as 'Investment trusts' of earlier years, but has low enough minimum
investments that even the least wealthy individual can use it, as opposed to the
most wealthy the investment trusts were set up for.
It is the brain child of John (Jack) Bogle who created the index fund. The
company he started is "The Vanguard Group." The idea behind it is that the
Fund Company is owned by the funds that are owned by the fund investors, so
there is no reason to bilk anyone out of their money.
Since this is a philosophy forum, as opposed to an investment forum, I will
not go too far into it. Probably the best read on index funds for the beginner
would be "Common Sense on Mutual Funds" by John C. Bogle. I don't know about
the UK, but in the US it is common for this to be in the libraries.
After you read this easy to understand book, I will offer you three more
that, for the independent and critical thinker, can advance you well beyond what
any investment advisor could. In fact, if history shows anything (here in the
US) advisors and money managers destroy wealth as opposed to help to
increase it.
Give it a read, and if you are still interested, let me know, and I will
offer the other three. By the time you read these four books, I feel you will be
able to handle your own finances better than any professional money manager
can. In fact Warren Buffett the wealthiest (as well as highest honesty and
integrity) states this as well.
I am in the process of trying to write a book easy enough that a fifth
grader can easily understand and make sense of all the options. This is somewhat
time consuming as I am trying it out chapter-by-chapter on friends who know
absolutely nothing about investing or saving.
I'll leave it at that for now.
Chin
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