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April 18, 2007


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When you say "index" funds... specifically, WHICH INDEXES? Thanks, NCN

Just to be pedantic:

Beating the index is not a loser's game, if you could be certain of doing it, then you would probably be a winner (depending on costs).

Aiming to beat the index is a loser's game as you are not certain of doing it, and the chances are very good that you will not, even more so after costs.

And no one is in the position of beating the index, the are at most aiming to beat it.

NCN --

I use Vanguard index funds. If you're interested in how to invest only using index funds, check out this post:

Is a discussion of return without risk ever valuable?

I've said this in a few different places. You don't HAVE to beat the market, you only have to beat inflation. Any return better than inflation is great.

When we refer to Index Funds it always leads us on the stocks in the market. Given the situation whether an investor would earn or lose is simply this basic rule: The investors would want that the stocks that he purchased would increase its par value and its saleability in the markets while the stock's firms would wish that his par value would remain constant or at best goes a lower to avoid losses, this kind of game played in the markets are indispensable. There are so many indicators that determine whether one would play or lay all his cards and money in the stocks exchange given the plus and minuses that must be taken into consideration. If the stocks become bearish, optimist would say it's time to buy for possible speculations that in the near distant future the stocks of it's par value would rise, hence he gains. If the markets becomes bullish most investors would unload some of their stocks and sell a portion of it for possible and visible gains or opportunities like having tours, vacations, buying cars or even real estate. As the Index Funds in the markets plays its roles there are significant and indispensable factors that affects its rise or fall or its gains or losses. For one the markets react sharply to political events happening in ones vicinity. If the political aspects of one country loses its cool, then the Index Funds tends to get bearish while if the political system is sound, the stocks strengthens and become bullish, hence investors would gain. The economic factors of ones locality is also affected, if there is wide spread inflation, the Index Funds would suffer the most. We therefore conclude that as the economy of ones country is stable and sound then the better it will be for the Index Funds and its gains as well as for the best interest of its investors. Another noteworthy observations that we can also see is the ability of firms listed in the Stocks Exchange to meet the requirements of the Stocks Exchange Commission or Bureau as far as legal requirements are concerned. Erring firms listed in the stock exchange who could not comply with laws and regulations imposed by the government get suspended, hence the money of the investors are held in suspense. The guiding and basic principle in buying stocks is as much as gaining its Index Funds and earn huge liquidity but foremost is the ability to buy the ownership of the companies, hence the concept of buy the ownership of business instead of their products apply. Over and above the plus and minuses, investing in stocks would enable one to earn cash and stocks dividends not disregarding stock option rights plus the notices to attend Annual Stockholder's Meeting. Investing in the marketable securities is one mode of taking risk to attain gains or possible losses. Take note money is just a game, so if John Doe's invest his money in stocks and flops then he says it is not right to invest in stocks but if his Index Funds affords him a hefty sums, he then says its luck and a wise decision. Given all these factors and indicators, an investor would then fantasize is it really worth risking most of his money on the marketable securities given that the Index Funds is in the ambivalent situation. Taking a long grasp and contemplating things in the plains to appreciate the highlands one investor would say it is indeed worth the risk for the greater is the risk, the greater would be the rewards and gains. As the saying goes: " The ship in the port is safe but for what is the ship for."

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