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5 Reasons To Avoid Index Funds

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GreenReeper Member Level  Saturday, 08/12/17 07:40:51 AM
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5 Reasons To Avoid Index Funds
Modern portfolio theory suggests that markets are efficient , and that a securitys price includes all available information. The suggestion is that active management of a portfolio is useless, and investors would be better off buying an index and letting it ride. However, stock prices do not always seem rational, and there is also ample evidence going against efficient markets. So, although many people say that index investing is the way to go, well look at some reasons why it isnt always the best choice. (For background reading, see our Index Investing Tutorial and Modern Portfolio Theory: An Overview.)

1. Lack of Downside Protection
The stock market has proved to be a great investment in the long run, but over the years it has had its fair share of bumps and bruises. Investing in an index fund , such as one that tracks the S


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