Index Funds

Invest for the long term and keep daily news in perspective. It's easy to get sucked into a negative mindset, with troubles at Facebook and JPMorgan Chase in the headlines. The social network's botched IPO and the bank's recent $2 billion trading loss hardly instill confidence in the stock market. Yet they're likely to be short-term distractions for the vast majority of investors. Often, it's easy to miss news that may have a significant impact on long-term investment returns, but doesn't grab attention like the stories dominating the 24-hour news cycle.

Invest for the long term and keep daily news in perspective. It's easy to get sucked into a negative mindset, with troubles at Facebook and JPMorgan Chase in the headlines. The social network's botched IPO and the bank's recent $2 billion trading loss hardly instill confidence in the stock market. Yet they're likely to be short-term distractions for the vast majority of investors. Often, it's easy to miss news that may have a significant impact on long-term investment returns, but doesn't grab attention like the stories dominating the 24-hour news cycle.

Fund investors who want to put their money to work as cheaply as possible have a couple of basic options: They can go with an index mutual fund or a comparable exchange-traded fund. It’s an either-or proposition. There are index funds and ETFs that invest in the same segments of the market. Whether they hold stocks or bonds, the key distinctions are expenses and restrictions on how investors can get in and out. Now, however, the nation’s largest fund company is venturing onto a third path, one that’s likely to become well traveled in coming years.

Take a close look at your bond portfolio, and you might be in for an unwelcome surprise. The Federal Reserve's attempt to revive the economy by buying up government debt has left many mutual fund investors with huge stakes in Uncle Sam's IOUs. Owning more Treasurys is sticking investors with disappointing recent returns, and in some instances losses. To be sure, Treasurys are super-safe investments that can help minimize losses when stocks decline. So they have a place in any well-diversified portfolio.

Whether you follow Wall Street or not, odds are you’re a mutual fund investor. Mutual funds are the foundation of 401(k) plans and individual retirement accounts. Yet many investors lack the patience to learn the finer points of funds, or give up trying. They’re intimidated by jargon such as “expense ratios’’ and “basis points.’’ Such fear can lead to poor choices that lock in years of high fees and subpar returns. Still others think they know their stuff and mistakenly move in and out of pricey funds that are hot performers, however fleeting.

Investors are becoming more price conscious. In response to the increased pressure to lower 401(k) costs, alternatives to traditional mutual fund investments that offer significantly lower fees are growing in popularity. The most recent offering is an all-index 401(k) plan from Schwab Retirement Plan Services Inc. The investment choices for the Schwab Index Advantage plan are limited to index funds, which are designed to track established market indexes such as the S&P 500. Index investing continues to grow in popularity because...

Pay a fund manager above-average fees and it’s reasonable to expect you’ll have a better than 50-50 chance of beating the stock market. Yet the latest numbers show a majority of managers aren’t keeping up their end of the deal. It’s a key reason why investors have been pulling cash out of managed funds at a rapid clip in recent years. It’s even happening to big mutual funds that have delivered above-market returns. A few ugly numbers: ■ Over the past five years, nearly 58 percent of managed US stock funds failed to beat a broad measure...

Vanguard on Friday announced strategic and management changes at six of its mutual funds. Five funds will begin to employ a low-cost index investing approach, rather than relying partly on professional managers to guide investment selection. In addition, Vanguard is replacing an outside manager at another fund in favor of a multimanager approach. Vanguard is the largest US mutual fund company, with $1.6 trillion in its lineup of more than 170 funds. Here's a look at key changes: Vanguard LifeStrategy funds: These funds were launched...

Vanguard is paying homage to its index investing roots, 35 years after launching the first index mutual fund. A new section of Vanguard’s website features articles, research, and videos on index investing by top strategists at the nation’s largest fund company. The broad message is this: Most investors should choose index funds that simply ride the markets, rather than try to beat the market by paying an investment-picking pro. Background Index investors expect to match performance of the...

It’s becoming more difficult for mutual fund mangers to hide. Although active management is all about stock-picking prowess, some fund managers essentially follow a market index — “closet indexers’’ is the derogatory term the industry uses. And in a time when investors are particularly sensitive about fees, these managers are getting noticed. Credit an analytical tool that a pair of Yale professors devised to identify closet index funds. These funds charge higher fees than index funds, yet timidly run their investment portfolios more like those lower-cost...

Investors are becoming more price conscious. In response to the increased pressure to lower 401(k) costs, alternatives to traditional mutual fund investments that offer significantly lower fees are growing in popularity. The most recent offering is an all-index 401(k) plan from Schwab Retirement Plan Services Inc. The investment choices for the Schwab Index Advantage plan are limited to index funds, which are designed to track established market indexes such as the S&P 500. Index investing continues to grow in popularity because index funds do not carry the higher...

Several 401(k) providers are rolling out new bells and whistles. Some are driven by the realization many workers haven't saved enough. And market volatility has reduced balances, prompting many customers to pull their money out of the market. Here's a snapshot of some of the new ideas: ■ Pension-like income from a 401(k). Companies in the 401(k) business are trying to come up with ways to offer a guaranteed income stream, much as traditional pension plans once did. Hartford Financial Services Group's plan allows account...

Vanguard on Friday announced strategic and management changes at six of its mutual funds. Five funds will begin to employ a low-cost index investing approach, rather than relying partly on professional managers to guide investment selection. In addition, Vanguard is replacing an outside manager at another fund in favor of a multimanager approach. Vanguard is the largest US mutual fund company, with $1.6 trillion in its lineup of more than 170 funds. Here's a look at key changes: Vanguard LifeStrategy funds: These funds were launched...

Vanguard is paying homage to its index investing roots, 35 years after launching the first index mutual fund. A new section of Vanguard’s website features articles, research, and videos on index investing by top strategists at the nation’s largest fund company. The broad message is this: Most investors should choose index funds that simply ride the markets, rather than try to beat the market by paying an investment-picking pro. Background Index investors expect to match performance of the...

Pay a fund manager above-average fees and it’s reasonable to expect you’ll have a better than 50-50 chance of beating the stock market. Yet the latest numbers show a majority of managers aren’t keeping up their end of the deal. It’s a key reason why investors have been pulling cash out of managed funds at a rapid clip in recent years. It’s even happening to big mutual funds that have delivered above-market returns. A few ugly numbers: ■ Over the past five years, nearly 58 percent of managed US stock funds failed to beat a broad...

Whether you follow Wall Street or not, odds are you’re a mutual fund investor. Mutual funds are the foundation of 401(k) plans and individual retirement accounts. Yet many investors lack the patience to learn the finer points of funds, or give up trying. They’re intimidated by jargon such as “expense ratios’’ and “basis points.’’ Such fear can lead to poor choices that lock in years of high fees and subpar returns. Still others think they know their stuff and mistakenly move in and out of pricey funds that are hot performers, however...

Vanguard is expanding access to its lowest-cost mutual fund share class for individual investors, a move that will bring fee reductions to nearly 2 million clients of the nation’s largest fund company. Vanguard said it is reducing the minimum investment amount to qualify for its Admiral share class, which charges lower investment expenses than its Investor mutual fund shares. The biggest cuts affect Vanguard’s index funds, which the company pioneered in the late 1970s as low-cost alternatives to actively managed funds relying on human investment-picking expertise.

WASHINGTON - Speculators should not be blamed for the huge swings in oil and natural gas prices over the past 18 months, a leading commodity investor told government regulators yesterday. John Hyland, chief investment officer for a firm that manages oil and natural gas funds, said his funds have instead helped reduce price volatility by buying oil and gas futures as prices fell and selling as prices rose. “The funds’ activities in the futures market have resulted in little or no price disruption,’’ Hyland said in a hearing before the Commodity Futures Trading Commission.

It’s becoming more difficult for mutual fund mangers to hide. Although active management is all about stock-picking prowess, some fund managers essentially follow a market index — “closet indexers’’ is the derogatory term the industry uses. And in a time when investors are particularly sensitive about fees, these managers are getting noticed. Credit an analytical tool that a pair of Yale professors devised to identify closet index funds. These funds charge higher fees than index funds, yet timidly run their investment portfolios more like those lower-cost alternatives.

John C. “Jack’’ Bogle is preoccupied by numbers. At 81, an age when most of us can only hope to be so sharp, the founder of mutual fund company Vanguard Group rattles off data point after data point. How much have investors earned in the stock market over the last century? Around 9 percent a year. How much of that came from dividend income? About half, with the rest coming from earnings growth that drives stock prices, Bogle says. The problem is those numbers don’t tell the whole story.