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Can someone explain how mutual and index funds work? So I just give my money to a bank and they will invest it in whatever stocks they want then pay me the profits? This sounds too good to be true to me. Do they have a chance of losing it? Can I take all my investment back whenever I want? How much profit is realistic, in percentage?
Also, is it better to invest your money in mutual funds and play safe or start businesses and risk losing money in them? The vast majority of businesses fail and a lot more people are on the business train now so the markets are oversaturated really and there's much more competition.
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http://www.investopedia.com/terms/i/indexfund.asp
An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. These funds adhere to specific rules or standards (e.g. efficient tax management or reducing tracking errors) that stay in place no matter the state of the markets.
BREAKING DOWN 'Index Fund'
"Indexing" is a passive form of fund management that has been successful in outperforming most actively managed mutual funds. While the most popular index funds track the S&P 500, a number of other indexes, including the Russell 2000 (small companies), the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Barclays Capital Aggregate Bond Index (total bond market) are widely used for index funds.
Index Funds vs. Actively Managed Funds
Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower management expense ratio on an index fund. Also, a majority of mutual funds fail to beat broad indexes, such as the S&P 500. Index funds are generally considered ideal core portfolio holdings for retirement accounts, such as individual retirement accounts (IRAs) and 401(k) accounts.
Since the fund managers of an index fund are simply replicating the performance of a benchmark index, they do not need the services of research analysts and others that assist in the stock selection process. Actively managed funds do need to utilize a research team. In these cases, the extra costs of fund management get reflected in the fund's expense ratio, and get passed on to shareholders.
Pic related, EDUCATE YOURSELF!
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>>1573043
Most of those books are really stupid and repeat the same bullshit over again. Read a Corporate Finance textbook and you'll know more than 99.99% of /biz/.
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>>1573043
>the snowball
>not on the list
Dropped from my 6th floor dorm window.
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>>1573170
The list is breddy gud, just needs snowball :DDD
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