Dow Jones Index Fund

We all remember the story of the tortoise and the hare. In this tale we have learned a valuable lesson: slow and steady wins the race. The turtle is not a glamorous creature and it may have lacked spice, but in the end he won.

Somehow, index funds are the modern day turtle in the race for a massive investment plan. Nothing flashy, just constantly keep pace with a particular index, and if, by chance, this index is well, then the fund also excels.

Index funds, which are a type of mutual funds, are a simple concept in the investment world. In an index fund, stocks are grouped the companies included in an index, for example, the S & P 500 or the Dow Jones Industrial Average. The percentage of stock is kept the same as the indices themselves in an attempt to mirror the index. While it is a rather simple concept is one that for some has been successful over time.

The Dow Jones Industrial Average (DIJA) is a weighted price index of 30 leading, most widely quoted stock on the New York Stock Exchange. The S & P 500 is an unmanaged group of securities considered representative of the stock market in general.

Whether or not you want to invest in an index fund depends on the type of investor you are. Each person has a particular style and keep in mind that index funds are different from the normal mutual funds.

Most mutual funds are actively managed, therefore, a fund manager is constantly picking stocks new or different to go into the fund. This active attempt to beat the market is based primarily on the calendar and choose the best stocks and bonds. This can sometimes pay off. Other times, it does not. Index funds, on the other hand, is a passive investment which means they are not actively managed.

But one of the most attractive index funds stems from the lack of active management. Because they do not need the same management and constant attention as actively managed mutual fund, expense ratios are generally lower.

Some say that if you can not beat the market, you might as well join it, which is one of the greatest attributes of an index fund. The funds are for people who want to follow the market.

So, are index funds for you? It depends on your investment style. As always, you should consult a financial adviser before investing, and whether index funds fit your overall investment strategy. But in the end, index funds offer another way to increase your wealth and achieving your financial goals.