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Author: thehendrys Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Just Starting Date: 1/10/2001 10:59 AM
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Why are index funds so much more appealing to investors??

There is risk involved when investing in Stocks. When you are investing only $2000 each time, you can really only pick maybe 1 or 2 stocks to purchase. There is considerable risk involved in hoping your 2 stocks "beat the market" over the long term. However, if you invest in an Index fund, like the S&P 500, then you are essentially investing in stocks without as much risk. In fact, you are investing in 500 stocks.

Also, with an Index Fund, you are guaranteed to match the return of the Index. The goal of a Mutual Fund is to beat the market index. Most Mutual Funds do worse than the market index. So if you invest in the index itself, then you will at least perform the same as the market (no better, no worse).

These decisions depend on the amount of risk you are willing to take. You have to weigh your risk versus reward. Pick a strategy, and if you lose sleep at night, your strategy is probably too risky.

Good luck in your decisions!
the hendrys
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