Disadvantages of Index Funds
- Underperformance- Index funds can underperform due to tracking errors, fees, or expenses.
- Lack of Flexibility- An index fund may be less flexible to meet the price deadlines in the securities.
- Cost of Investment- The index fund’s expense ratio is nearly 0, but it must be noted there are several mutual funds having higher expense ratios but generating huge returns.
- Investment period- These funds are suitable for higher-time investment. Index funds experience a lot of fluctuations in a short period.
Lastly, you will never beat the market as these funds are solely dependent to match the market performance.
What are Index Funds?
Diversification is important to be a good investor, so people buy mutual funds and start investing, but it also has some risks. Now, to decrease the equity market risk. Investors start looking for Index Funds. Here we will talk about Index Funds along with their benefits and a lot more.