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Fund SelectionBeginner7 min

Index Fund Investing Explained

Index funds aim to replicate benchmark returns with low costs and transparent rules-based construction.

Why Investors Use Index Funds

They provide broad market exposure and can serve as a strong core allocation anchor.

Lower expense ratios support long-term compounding efficiency.

Evaluation Checklist

Review expense ratio, tracking difference, and index relevance to your plan.

Lower cost is good, but tracking quality also matters.

Core-Satellite Design

Many portfolios use index funds as core and selective active funds as satellites.

Rebalancing keeps the active sleeve from dominating total risk.

Key Takeaways

  • Index funds are efficient core building blocks.
  • Tracking quality and cost both matter.
  • Active and passive can complement each other.