Can someone explain how mutual and index funds work? So I just

>>1574929
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.

>>1574929
Index funds are bundles of stocks of a market index. A market index is a section of the stock market - anything from the S&P 500 to music companies - sold together. You own the fund, not the fund seller. The fund seller acts as the broker.

It's so cheap because unlike a hedge fund which needs to hire teams of very expensive financial experts to pick stocks 24/7, an index just takes the most popular stocks, for example the largest 25 insurance companies - and sells them.

The performance of indexes varies but you can expect 7%. These things have a very small chance of going bust since they buy stocks from many blue chips.

>>1575203
Can you answer all the questions in the OP?

>>1575203
You should not expect 7%

>>1575327
https://ycharts.com/indices/%5ESPXTR/ytd_return

you're right he should expect 15%

>>1574929
No
No
It's not
Yes
Yes
It varies too much to give a number. Sp500 funds are up about 5.5 percent ytd

>>1575320
Yes, you can sell them whenever you want. They function like stocks.

It's much better to invest in index funds. You can start a business when you have a lot of captial. If you're just looking into making money you can try investing.

>>1577484
Thanks.

Can you recommend books where I can learn all about finance, business, economics, etc so I don't have to keep asking beginner questions like in the OP?

Thanks again.

>>1575327
right
>>1575361
>15%
oh boy you have no idea

3-4 longterm - quote me on this in 10 15 20 years

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>>1577524

>being this salty because you can't beat an index fund's returns with an actively traded portfolio

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>>1577524
>>1577633

https://www.ft.com/content/4cdf2f88-7695-11e6-b60a-de4532d5ea35

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>>1577498

>>1577498
Investopedia for basic terms like net income and leverage. Security Analysis and Intelligent Investor by Benjamin Graham. Don't take my word for it, Buffett recommends these books highly.

To those saying index funds suck - what are your alternatives? Gamble on an efficient market or really believe you are smarter than the elite wall street traders?