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Why Indexing Works

PERFORMANCE
The average Standard & Poor's 500-stock index fund returned about 18% annually over the past 10 years, vs. about 16% for the average equity fund.

COST
Vanguard Index 500 Fund charges 0.18% of assets to cover expenses, vs. 1.45% for the average equity fund.

LOW TURNOVER
Index funds don't trade a lot, so they have low transaction costs and minimal capital-gains distributions.

MANAGEMENT
To determine the S&P 500, a committee periodically replaces fading companies with up-and-comers deemed more representative of the overall economy.

DIVERSIFICATION
Indexes contain hundreds of stocks, so they benefit when investors get bullish on an industry or mergers occur.


DATA: MORNINGSTAR INC., BUSINESS WEEK


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Updated Jan. 7, 1999 by bwwebmaster
Copyright 1999, Bloomberg L.P.
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