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why index

This article covers some of the "why" of indexing, specifically, some financial reasons why index investing makes sense over some alternative choices.

But before we even go that far... There are two kinds of people, those who find finance fascinating and those who really don't. If you don't, then indexing is the perfect "set it and forget it" strategy. It's likely to give satisfactory results and require very little attention, so you can get on with your life.

On the other hand, if you really do find finance interesting: interest and success are two different things. For example, you might love the clarinet and be very knowledgeable about clarinet music, but the first time you try to play one it will still sound like you're blowing air into a rattlesnake. A lot of very knowledgeable investors have lost a lot of money, even while the indexes were doing just fine. If you're analytical and good with numbers, it's only a matter of time before the logic of indexing (diversification, low expenses, tax efficiency, control over your allocation) starts making total sense.

 

 

 

 

Article Contents
Why Index? Intro
Fund Expenses
Style Drift
Stock Trading

Article Contents
Index Funds Article

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