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Indexes are not perpetual motion machines free of maintenance, but require periodic management through additions, deletions, and security reweighting. Also blurring the line between active and passive is the fact that some investors may use index funds to pursue an active investment approach.
1AUM as of 12/31/2020 computed using Morningstar data for US-domiciled, USD-denominated open-end and exchange-tradedfunds, excluding fund-of-funds. 5Wes Crill, “Out of Bounds: Style Drift in the Russell 2000 Value Index,” Insights (blog), Dimensional Fund Advisors, June 2021. Fama and Kenneth R.
5Weston Wellington, “Hindenburg Omen Flames Out,” Down to the Wire (blog), Dimensional Fund Advisors, October 8, 2010. According to the Investment Company Institute, there were 2,997 domestic equity funds and 1,032 US equity exchange-tradedfunds at the end of 2020.
Investors can choose from popular index funds offered by reputable firms, such as the Fidelity 500 Index Fund or the Schwab S&P 500 Index Fund. There are exchange-tradedfunds , too, like the Vanguard S&P 500 ETF or the iShares Core S&P 500 ETF. All of these are low-cost options. since 1926.
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