Is It True That Regular Index Investing Performs Good Result With Low Risk?
899
Finance > Mutual Funds
Mar 1, 2007
Alexander Korablev
Is It True That Regular Index Investing Performs Good Result With Low Risk?
There are many mutual funds and ETF on the market. But only a few performs results as good as s&p 500 or better. Well known that s&p 500 performs good results in long terms. But how can we convert these good results into money? We can buy index fund shares.
Index Funds seek investment results that correspond with the total return of the some market index (for example s&p 500). Investing into index funds gives chance that the result of this investment will be close to result of the index.
As we see, we receive good result doing nothing. It's main advantages of investing into index funds.
This investment strategy works better for long term. It means that you have to invest your money into index funds for 5 years or longer. Most of people have no much money for big one time investment. But we can invest small amount of dollars every month.
We have tested performance for 5-years regular investment into three indexes (S&P500, S&P Mid Caps 400, S&P Small Caps 600). The result of testing shows that every month investing small amounts of dollar gives good results. Statistic shows that you will receive profit from 26% to 28.50% of initial investment into S&P 500 with 80% probability.
We must note that investing into indexes isn't risk-free investment. There are results with loosing in our testing. The poorest result is loosing about 33% of initial investment into S&P 500.
Diversification is the best way to reduce risk. Investing into 2-3 different indexes can reduce risk significantly. Best results are given by investing into indexes with different types of assets (bond index and share index) or different classes of assets (small caps, mid caps, big caps).
You can find full version of this article with full results of our tests here: http://fplab.com/node/116 Alexander Korablev is head of FPLab Team. Fplab.com is trainings and courses catalog for traders and investors.
Index Funds seek investment results that correspond with the total return of the some market index (for example s&p 500). Investing into index funds gives chance that the result of this investment will be close to result of the index.
As we see, we receive good result doing nothing. It's main advantages of investing into index funds.
This investment strategy works better for long term. It means that you have to invest your money into index funds for 5 years or longer. Most of people have no much money for big one time investment. But we can invest small amount of dollars every month.
We have tested performance for 5-years regular investment into three indexes (S&P500, S&P Mid Caps 400, S&P Small Caps 600). The result of testing shows that every month investing small amounts of dollar gives good results. Statistic shows that you will receive profit from 26% to 28.50% of initial investment into S&P 500 with 80% probability.
We must note that investing into indexes isn't risk-free investment. There are results with loosing in our testing. The poorest result is loosing about 33% of initial investment into S&P 500.
Diversification is the best way to reduce risk. Investing into 2-3 different indexes can reduce risk significantly. Best results are given by investing into indexes with different types of assets (bond index and share index) or different classes of assets (small caps, mid caps, big caps).
You can find full version of this article with full results of our tests here: http://fplab.com/node/116 Alexander Korablev is head of FPLab Team. Fplab.com is trainings and courses catalog for traders and investors.
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links owned by this user
There are many mutual funds and ETF on the market. But only a few performs results as good as s&p 500 or better. Well known that s&p 500 performs good results in long terms. But how can we convert these good results into money? We can buy index fund
Category:
Other links at Finance > Mutual Funds
We have all heard the advantages of investing in a mutual fund over trying to pick individual stocks. First of all mutual funds hire professional analysts that are market experts and out many hours of study to the various stocks. Unless you want to
Category:
An inormed investor knows where his money is going. For an investor in mutual unds, it is essential to understand the expenses o mutual unds. These expenses directly inluence the returns and cannot be neglected. The expenses o mutual
Category:
Copyright 2006 Equitrend, Inc. Many investors still don't know about Exchange Tred Funds (or ETFs) and their vantages over tritional mutual funds. In this article, we'll examine Exchange Tred Funds, their history, performance and
Category:
Copyright 2006 Michael Saville Mutual funds are very popular. In fact, they are the one of the most popular ments on the market today. What does that mean in numbers? There are over 10,000 different funds with over $4 trillion in
Category:
Mutual fund info is one of the most sought after things on the market when it comes to investing. People are considering this fun option for my reasons. First, what is a mutual fund? It is a way of allowing my investors to pool their money together
Category:
Site Sponsor
Directory Statistics
Articles: 68285
Categories: 501
Yahoo Entertainment
