An index fund is a financial instrument that provides exceptional diversity at low cost. It is traded like a stock, except when you buy a stock you purchase shares in one company. When you buy an index fund, you buy all the companies in the index it tracks, all at once, in one simple transaction and your financial returns replicate closely those of the market the index tracks. Index funds don’t try to beat the market – they try to be the market by mirroring the index as a whole.
Based on research from Paul Samuelson at MIT and others, index funds were introduced to the public by John Bogle, the founder of Vanguard, who wrote his senior thesis at Princeton in 1951 on index funds.
Index funds are simple to understand, have low fees, and often have a smaller tax burden compared to many mutual funds. Lower costs contribute to long-term wealth. By focusing on what is controllable, costs and asset allocation, One Day In July financial advisors aim to generate excellent returns while managing risk.
“Don't look for the needle in the haystack. Just buy the haystack.”
~ John Bogle
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