We Recommend Index Funds

We recommend a diversified portfolio of index funds

• We recommend that you hold mutual funds rather than individual stocks or bonds – mutual funds are less risky than the individual securities.
  • Individual securities are risky.
  • Each security’s risk consists of a market or shared component and a security-specific component.
  • Investment returns compensate you only for the shared or market component.
  • You can “average out” the security-specific component by holding many securities – you can accomplish this very efficiently with mutual funds
• We recommend that you hold a diversified portfolio of mutual funds.
  • Diversification – holding multiple assets with returns that are relatively uncorrelated with (unrelated to) each other – offers greater expected return for the same level of risk, or less risk for a given expected return
  • You can diversify – hold multiple uncorrelated assets – more efficiently, less expensively, with mutual funds than with individual securities
• Index funds offer more expected return at less risk than managed funds
  • Index funds cost less (have lower expense ratios) than managed funds
  • On average, probably as a result of their lower expenses, mutual funds tend to outperform managed funds that invest in the same asset classes
  • Index funds have less risk than managed funds – when you buy a managed fund, you accept both the risk of the relevant index and the manager risk – the risk of how well the manager will perform relative to the relevant index

It is very important to understand several facts about investing in general, and index fund investing in particular:

• Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment, investment strategy or product that this Website refers to directly or indirectly, or even indirectly via link to any unaffiliated third-party Website, will be profitable or equal to corresponding indicated performance levels.
• Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be either suitable or profitable for your investment portfolio. You should not assume that any information presented and/or made available on this Website serves as the receipt of, or a substitute for, personalized individual advice from the adviser or any other investment professional.
• Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.