Why Index Funds Could be a Mistake in 2020

Today when investors say they are “in the market” or “out of the market,” they most often are using shorthand to discuss the stock market. This is understood, even though there are many other active investment markets. The others don’t get as much attention. In fact, because of current investment practices, the term “in the market” usually implies exposure to one of the major index averages. It wasn’t always this way. Not too long ago, investors would build a portfolio working with a broker and buy a small basket of stocks. Commissions were high, but a good broker was worth the price because of the in-depth research they conducted. Back then, “in the market” didn’t mean broad exposure to 500-2000 holdings. Far fewer. The reason for the change, of course, is an evolution that gained momentum around 1980. It was then that mutual funds started to become understood throughout households, many of which had never been “in the market” before. Mutual funds allowed investors, even small ones, to benefit from what has been a cyclical but rising market, but with much lower entry fees. Read More >>