An index fund is a special type of fund that invests money in financial vehicles that make up an index. For example, a stock index fund that wants to replicate the stock market may buy all 500 shares that make up a stock index like the S&P 500 index. This "copycat" index fund will change more or less in the same way as the S&P 500 index.A stock index fund will always move up and down close to the same amount as the stock market. You will never be disappointed that your fund performed much worse than the stock market. Index funds work to ratchet up or down in proportion to the market as a whole. When you read in the papers that the stock market went up 15% in any given year, your index fund will also be up about 15% if you had held that index fund throughout the entire year. This does not mean that an index fund will never go down in value. It only means it will go down in value at about the same rate as the stock market should the stock market decline. The benefit of index … [Read more...] about What Are Index Funds?
International value index fund
“In value investing, patience is a prerequisite to reap gains. That is why it is important for investors to stay put with their investments whether through SIP or otherwise. As value gets unlocked investors will be beneficiaries of exponential gains from these investments,” said Mrinal Singh, Deputy CIO- Equity, ICICI Prudential Mutual Fund, in an interview to Avneet Kaur of ETMutualFunds.com. ICICI Prudential Value Discovery Fund is underperforming its benchmark in one-, three- and five-year horizons. The scheme has given -8.60 per cent in the last one year, 3.31 per cent in the three-year period and 6.27 per cent in five years. What is the reason behind the underperformance?The recent performance of ICICI Prudential Value Discovery Fund has been a function of the markets being expensive without the data being supportive. We have avoided names where the valuations are stretched and are invested largely in names/sectors which we believe currently offer value. The … [Read more...] about Recent performance of Value Discovery Fund due to expensive markets, says Mrinal Singh of ICICI Prudential Mutual Fund
I recently heard a story about a woman who owned 84 mutual funds. So what, you might say? Well, having too many mutual funds can lead to several problems:Time crunch - difficulty finding the time to stay up on developments that could negatively impact your portfolio performance such as a fund manager retirement. Increased risk - due to overweighting in a particular stock owned by several different mutual funds. Diluted returns - if you have too many mutual funds, you could see the returns canceled by the losses in a one-to-one ratio such that your portfolio performance goes nowhere.Conventional investment wisdom tells us to diversify our holdings so that we minimize risk and maximize return. That is sound advice but exactly how many mutual funds should you own to achieve that diversification? The answer to this question varies depending upon your investment goals but you can use a standard rule of thumb to help make this decision.Investors have 13 standard asset classes from which … [Read more...] about Mutual Fund Overdose: How Many is Too Many?
At Vanguard, which popularized the S&P 500 index funds, workers will no longer be able to choose that option in their 401(k) retirement plan. The S&P 500 index fund, one of the low-cost examples of passive investing that put the firm on the investing map, will be dropped this month from the mutual fund giant’s menu of options for its employees’ 401(k) plans. Jim Boyer, who previously worked in Vanguard’s defined-contribution retirement plan division, said the overall menu of funds available are still “great, but why would the firm risk a potential lawsuit by getting away from the S&P 500 index fund in its own retirement plan?” Boyer said colleagues were upset over the removal of the S&P 500 index fund — an institutional class of shares in the fund that charged just 0.02 percent annually, making it one of the cheapest options. Vanguard pioneered the use of such low-cost funds. “This is one of the most important funds that … [Read more...] about For Vanguard employees’ own retirement fund, the firm will no longer offer its signature S&P 500 index fund
Index funds that use market capitalization for their construction have been around since the first fund was created 40 years ago. Rob Arnott, this week’s guest on Masters in Business, figured there had to be a better way to create index-based investments. His research led him to the concept of using equity fundamentals — earnings, dividend yield, book value and other concepts — to create indexes. Thus, the idea of so-called smart beta was born. His goal was to create funds that were still passively managed, but didn't run into issues where certain holdings became over- or underweighted — and yet still have a chance to outperform the broader capitalization-weighted benchmark indexes. Arnott is the founder and chairman of Research Affiliates LLC, and his ideas on fundamental indexing are the intellectual property behind more than $200 billion in investment portfolios. He explains why fundamental indexing is superior to either active … [Read more...] about How to Build a Better Index Fund
Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards CACI International Inc (NYSE:CACI). CACI International Inc (NYSE:CACI) was in 29 hedge funds' portfolios at the end of June. CACI has seen an increase in hedge fund sentiment in recent months. There were 13 hedge funds in our database with CACI holdings at the end of the previous quarter. Our … [Read more...] about Hedge Funds Have Never Been This Bullish On CACI International Inc (CACI)