Is the US shifting from mutual funds to index funds?
Warren Buffett for decades has been saying that passively managed Index funds are far better than mutual funds. In the US, Investments in Index Funds have grown by 406 times in the last 30 years and in Mutual Funds by 6 times over the same period.
30 years ago, Mutual Funds in the US market were 60 times that of Index Funds. This year, Index Funds surpassed Mutual Funds in Assets Under Management. In India, Mutual Funds are 7.5x of Index Funds today.
MFs basically say that we will invest for you and we will charge you a little money for that every year (generally 2%). Seems like a small amount, so we just ignore it. If you were to invest the same money in Index funds you don’t pay this small 2%.
You can check out how these "fees" impact your returns substantially by clicking here:
Here's a visual on this change that has been in the process:
Additionally, as per stats declared by RBI, the majority of large-cap mutual funds have actually never outperformed the markets over a 5 and 10-year period.
Cheers!
End-Week Wisdom:
"If you are smart, you wont use leverage. If your are dumb, you shoud'nt use it" -Warren Buffet
If you want to know about something related to finance, or have any queries:
Please drop us an email: advisoira@gmail.com
Create your financial plan in less than 3000 Rupees: Visit Website
You can also follow us here: Twitter, Linkedin!