Is an index fund really a pot of gold at the end of the rainbow?
June 18, 2008 7:34 AM Subscribe
InvestingFilter: Is there anything inherently flawed about investing in index funds?
posted by reenum to work & money (24 answers total) 16 users marked this as a favorite
I recently opened up a Roth IRA, and have invested in an S&P 500 Index Fund. I'll also be investing in a bond index soon.
I've been reading articles online and books such as 'The Lazy Person's Guide To Investing' by Paul Farrell. These books make it seem that investing in anything but index funds sets you up for a loss long term.
In my opinion, I'm a passive investor. I don't have the inclination to try and pick hot stocks. I'm fine getting a market average return. Farrell's book and some other sources such David Swenson make it seem that investing in anything but an index fund is lunacy. They harp on about load funds and how actively managed funds always underperform the market.
My question is: What's the catch about investing in index funds? It seems to good to be true. You keep putting money in and 30 years later, a nice pile is waiting for your retirement.
Some input from the more financial minded members of the Hive Mind would be much appreciated.