It is true that Index Funds in recent years have vastly outperformed the majority of actively managed funds, but this is not always the case in all corners of the market. Broad-market Index Funds can spread out risk very well, leading to excellent returns over time.

However, investments in only Index Funds or Sector Funds can actually be more risky than actively managed funds if market conditions overall take a sudden turn. Fixed income index funds, for example, have been shown to favor companies and countries that issue the most debt. Sovereign debt funds, too, have left many investors snakebitten in recent years.

For more on investing misconceptions, check out our new article, Misconceptions are the Vultures of Investing, tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>