Index funds are more popular than ever—here's why they're a smart investment. (via CNBCMakeIt)
. "If returns are going to be seven or 8% and you're paying 1% for fees, that makes an enormous difference in how much money you're going to have in retirement."
Second, index funds tend to perform better over the long term than actively managed funds, making them ideal for people investing for retirement. It's incredibly hard for a person to pick stocks that will beat the market and even harder to do so consistently over decades.. "While a fund manager may outperform for a year or two, the outperformance does not persist," CNBC reported.
Where active funds theoretically have a leg up is during periods of market volatility. The theory is that the managers will be able to shield their investors from some of the market's deviations. But that wasn't the case in 2018, for example, when managers still under-performed indexes, despite a rocky fourth quarter.
For the everyday investor looking to build wealth long term, that all adds up to make low-cost index funds a go-to investment.
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