The Challenge of Finding the Best Index Funds

| September 22, 2017
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A friend of mine recently asked: “What are the top 5 Index Funds?” My answer is, “it depends.”

Index funds or ETFs are portfolios constructed to match or track a pre-specified basket of underlying investments. By definition, most have the same fundamental makeup. For example, an S&P 500 ETF holds stocks from 500 US Companies that represent 25 industry groups listed on the NASDAQ. A total bond fund ETF invests solely in bonds from public and private sectors, and with varying strategies, maturities, and ratings.

When considering ETFs, here are a few (but not all!) items to consider:

1. Fees. Commissions, annual operating fees, expenses can diminish your return. The lower the fees, the more money in your pocket.

2. Performance. Looking for the top performing index funds for the last 1-3-5 years is a slippery slope. Past performance is no indication of future returns. What goes up typically comes down. You may wish to ask yourself: “Am I buying at a market high? Is the return sustainable? What else should I be considering?” Chasing returns does not work.

3. Risk Tolerance & Investment Objectives. Take care of you! Match your investments to your own needs. Are you concerned about safety or growth? The best ETF’s is a mix of diversified investments that serve your particular needs, risk tolerance, and time horizon.

The short answer for “best,” in my opinion, is an allocation that works for you. In my research, I look for ETF’s that are offered by a quality company and that have the lowest fees and trading costs. The next step is to match the investments that best suit the needs of my clients. While ETF’s seem straightforward at first, it is important to do your homework. While some are clear-cut and others participate in complex investment strategies.

If you would you like a complimentary portfolio review, or if you have any questions, please feel free to contact me.

Barbara Norman, CFP® ChFC®

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Additional information on any securities mentioned is available on request. We cannot assure the accuracy or completeness of these materials. Sage Path Solutions does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. Please consult with your tax or legal expert for advice pertaining to your own situation. Investment Advisory services offer through Laurel Wealth Advisors, Inc., a Registered Investment Advisor.

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