Index Mutual Funds

Index mutual funds are a method by which all stocks are bought in an index. A stock index is a slice of the stock market. It may the Standard and Poor's 500 or the Dow Jones in America, or the Hong Kong Hang Seng or the Morgan Stanley Biotech. There are dozens if not hundreds of indexes from the United States and around the world, and indexed stocks are based on how the averages of those indexed funds rise and fall from day to day. It is claimed by many experts that passively managed index mutual or shared stocks outperform actively managed shared funds over a long period of time. If this is true, then the money spent by common fund holders to have their portfolios managed is really being wasted. Management costs of index mutual funds run about one fifth of actively managed funds, meaning that over a thirty or forty year period, a lot of money could be saved by a person investing only in indexed funds.

Many investors want to only pick and choose their stocks separately. Feeling that their wisdom is more astute, these investors eschew the shared stock fund way of thinking, which is to lump a number of different stocks together, often bound by common economic themes such real estate, biomedical , utilities, etc. Sometimes these individually picked stocks do outperform the bundled model of the shared stock. But spending hours and hours every day becoming an expert in trading is not practical for most Americans. The average person doesn't have time to pore over massive reports or watch the ticker six hours each day so he chooses a mutual fund with which he is comfortable and leaves the management of that fund to someone else. In each of these cases, the shared funds are managed each day by a few managers who may dump or buy stocks, depending on the latest market developments. The result has been that mutual funds have been called the investment of the average Joe.

A mutual fund indexed or not must be registered with the Securities and Exchange Commission. This requirement enables all investors to have a prospectus available for viewing on each fund, disclosing exactly where each investment is being made as well as information about the fund manager. Shared stocks are now a very popular part of retirement plans such as a 401(k) plan. If a person chooses index mutual funds as the benchmark for one's retirement, the difference over several decades of investing could be profound. But there is a catch to investing in index mutual funds that an investor should be aware of before making the plunge.

Index mutual funds are for the long haul investor. Many people get very skittish about short term losses and the rollercoaster affects of daily market turmoil, and are prone to pull out of one fund and place in another quite frequently. That is a recipe for financial chaos and great loss. In some years an index may not perform as well as investments on individual companies, yet over time, different sectors of the stock market have produced the same results. Translated that means with much smaller management costs index mutual funds will be the much greater profit producing vehicle.

So the question really boils down to why would a person even mess with spending hours or days trying to decide in which mutual fund to invest when over time indexing is just as effective and cheaper? No fancy and high priced money managers to suck up one's money in administrative fees and no worries about choosing the wrong mutual fund. By the way, do worries about poor market performance and dwindling portfolio values have you down? What if a person's basic needs in life were always assured; a place to live and food on the table? Listen to these words of David: "I have been young and now I am old; yet I have not seen the righteous forsaken nor his seed begging bread." (Psalm 37:25)

There are two ways that a person can invest in indexes. One is through index mutual funds and the other is through what are called exchange traded funds. One of the best known names for these ETFs is Spiders. Spiders are bought and sold just like stocks and a person will have to pay a commission each time one is bought or sold. If a person invests in index mutual funds there can be high minimum investment requirements. Sometimes these requirements can be waived if the investor enrolls in automatic withdrawals from one's checking account into the investment portfolio each month.

In the world of stock market investing, there are almost no absolutes other than that there will be ups and downs. And when there are perpetual downturns, people who have placed so much value on accumulating wealth often begin to look at what life is really all about. Indexing may not ever save one's retirement or life savings from being wiped out in an economic tsunami that occurs every so often in history. At times like those, more emphasis seems to be placed on family, community and the care for neighbors and friends. Even the once heralded goal of retirement before sixty may have to be scrapped in lieu of working much longer than anticipated. Even the finest money managers on the planet have to sometimes put their heads in their hands and wonder what is truly important besides a tattered portfolio and mansion no longer to be afforded.

Green Mutual Funds

Green mutual funds are special sector shares in companies that promote renewable energy, recycling, and natural resources or products. These companies are environmentally responsible companies that seek to help the environment through various resources. Socially responsible mutual funds invest in clean air, clean water, clean energy, smart growth, renewable and natural resources, sustainable living, clean transportation, and clean or green building. Rising oil prices, concern of energy shortages, and the health of the environment has led to growth for companies who are environmental responsible. The concerns of the environment are spurring new companies that are goal-oriented to work toward cleaner technologies and to minimize environmental damage. Purchasing shares in socially responsible companies is considered a smart move among today's investors.

Some of the ways that environmentally responsible companies are helping the environment include recycling, manufacturing hybrid vehicles, installing solar panels, wind turbines, ocean turbines, producing organic and natural foods or other consumable products, and investing in smart growth. When a buyer purchases shares in companies who offer socially responsible mutual funds he or she is investing in a promising future. Investing in the future can also be accomplished by participating in recycling opportunities. Consumers can become proactive with recycling by taking advantage of the opportunity to place appropriate products in a recycle bin. Most cities provide citizens with a recycle bin that they can place cardboard, paper, and cans in and they usually offer curb pickup on the same day of trash pickup.

Another way that the consumer can help the environment is to purchase a hybrid automobile. Most car manufacturers today have several versions of hybrids for consumers to choose from. These vehicles are either all electric or half electric and half gasoline. In addition, some vehicles are hydrogen-powered and do not use any gasoline. Many car manufacturers seem to understand the need for these types of vehicles because the choices are increasing. Investing in green mutual funds that include companies that offer hybrid vehicles not only help the economy but help the consumer with fuel costs and income taxes. The government offers tax breaks for anyone who purchases a hybrid. In addition, it seems unlikely that oil prices are going to go down but instead will probably continue rising.

A few smart growth companies today are working towards developing carbon-free coal burning power plants. These plants are going to be set up to produce electricity and hydrogen primarily free of pollution. If this can be done the investments in green mutual funds in this industry will become very profitable. One way to become knowledgeable about these types of investments is by keeping up with the news. Another way to learn about green companies and what is being done in the world today to help the environment is by using a broker who stays on top of the latest technologies and the news on environmentally friendly companies. Brokers and other information can be found on the Internet by doing a search for socially responsible mutual funds.

Wind power is becoming more profitable every day. Utility companies are using wind turbines to harness energy as a renewable source. Wind turbines are initially costly and are very large which makes them difficult to transport but the initial cost to build them and move them is minimal when considering the benefits of the lower energy costs. Generally several thousand wind turbines can power millions of homes. Purchasing green mutual funds in this industry will provide profitable outcomes for many years to come as the use of wind turbines continues to increase. Wind turbines are also used in the ocean and on dams to produce renewable energy. Tax credits and incentives will no doubt bring more companies into this industry in the future and will spur interest in the stock market as well. In most communities the consumer has a choice as to which utility company to choose for electric service. Choosing a utility company that is searching for ways to provide renewable energy and help the environment is a choice that any consumer can feel good about.

Companies that are considered socially irresponsible are ones that are bad for society. Some of these are adult entertainment, alcohol, tobacco, weapons, gambling, and ones that produce chemicals and environmental hazards. Investors should also beware of companies that promote terrorism. The Word of God instructs us that we should not become involved with those who are not believers. Christian shareholders will want to choose their investments wisely based upon Biblical principles. "Be not unequally yoked together with unbelievers: for what fellowship hath righteousness with unrighteousness? And what communion hath light with darkness" (2 Corinthians 6:14)? Choosing to invest in green mutual funds is a good place to start. Finding out specifics about companies by doing some research can help an investor become more informed. The manager of the fund can supply information that includes the companies or industries that make up a particular share.

Other companies that offer buyers a reason to invest in socially responsible mutual funds include various types of industries. Some of these include companies who are interested in product safety, human rights, community relations, indigenous rights of people, workplace ethics, and workplace safety. Companies that adhere to high standards of operation and work towards helping society and the environment are considered socially responsible. A potential buyer should consider what issues are the most important to him or her when it comes to purchasing shares. The most important rule of thumb is to invest diversely and not put everything into one fund.

Copyright© 2017 ChristiaNet®. All Rights Reserved.