Index Fund or an Actively Managed Fund?
b'With\\xa0Christine Benz, Director of Personal Finance at Morningstar, Author \\u2013 Morningstar Guide to Mutual Funds: 5 Star Strategies for Success
Index Fund or Actively Managed Fund \\u2013 which one\\u2019s better? The debate rages on\\u2026 with nuances and benefits on both sides. Index Funds or passively-managed funds have low costs and are very popular because they typically match Index returns. And Actively Managed Funds typically get a bad rap because most of them underperform their benchmark, and are, of course, more expensive because investors are paying for that extra bit of alpha. So while it\\u2019s tempting to just put all your money into Index Funds, Christine makes the case that a bit of balance could better match your investment goals. See, not everyone has the same level of risk aversion and some investors \\u2013 such as young or wealthy investors \\u2013 may choose to put a portion of their portfolio into an actively-managed fund to potentially get higher returns or get exposure to sectors that help with portfolio hedging or diversification.
Moreover, after a prolonged bull market, such as what we\\u2019ve had for a few years now, Index Funds naturally come out looking better. But with shares up across the Board, sticking with Index Funds could deliver large negative returns if the market tanks\\u2026 and this is where an actively-managed fund may deliver hedging and other benefits. So stock market movements may favor one or the other. All this, and much more, on the pros and cons of Index versus Actively-Managed Funds.'