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» 38th Edition of the Carnival of Investing from Pragmatic Finance
Welcome to the 38th edition of the Carnival of Investing. I am your host, Pragmatic Finance and I will give you the run down on what went on in the investment blogosphere this past week. I had to chuckle when My 1st Million at 33 said I beat you on th... [Read More]

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Hello FMF,

Have you seen this article in the NY Times about indexing? I think you'll like it.

October 29, 2006
Fundamentally
If You’re Playing ‘Beat the Benchmark,’ Don’t Expect to Win By PAUL J. LIM
http://www.nytimes.com/2006/10/29/business/yourmoney/29fund.html?_r=1&ref=yourmoney&oref=slogin

Thanks -- I'll check it out!

I'm young and want to start investing in index funds. Where do you recommend I go to open an account? I'd start out w/ about $1500.
Thanks

Denis -- I'd recommend Vanguard. I've always had great service from them. (though I'm not sure of their minimums.)

Totally agree with your post. Index funds are particularly appealing to me because I can be pretty lazy about keeping an eye on things and I don't have fund managers trying to bleed me dry. Here's an article I found on MSN and I was wondering what you make of it:

http://articles.moneycentral.msn.com/Investing/MutualFunds/JustBeatingTheMarketIsTooEasy.aspx

You missed just one advantage of index funds - they are tax friendly. Index funds have not only lower fees, but also save you from taxes (due to the fact that index funds hold the stock longer than the other types of mutual funds) and thus generate higher returns by allowing you to invest those saved money.

source: http://www.mutual-funds-advisor.com/index-mutual-funds/index-mutual-funds-definition.html

You're right, when it comes to low mutual fund expenses, it just doesn't get any better than with index funds. One of the primary reasons for this is that they employ statistical sampling techniques to create portfolios that track their respective indexes very closely.

Statistical sampling makes it possible to track an index very closely while avoiding the cost of constantly buying and selling securities to maintain a scale model of the index. If an index fund actually owned all of the securities in an index and maintained the appropriate weighting, the trading costs would erode the fund's NAV and result in persistent under-performance.

I checked out the vanguard index funds the return wasn't that great, it's about the same as putting in a CD am I looking at the wrong thing. I know the market has been in shambles, with the market the way it is do you still feel an index fund is the best investment?

2 million --

I feel it's a great investment OVER THE LONG TERM. I have a 20 to 30 year time horizon, and I keep putting more and more into them.

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