> Mutual funds vs index funds?

Mutual funds vs index funds?

Posted at: 2014-12-05 
I need help I keep hearing these investing strategies but What are the differences between the two, which is better? How much money do you need to start and how do I start?

An index fund is a mutual fund that tracks a specific index, such as the S&P 500 Index. But not all mutual funds are index funds. There are thousands of mutual funds out there. You hear a lot about index funds because of their low fees. Many investors pay high fees trying to earn a higher return than what the market offers but many times these investors fail. Index funds allow you to track the market (meaning to earn roughly what the market earns) and to do so at a very low cost. You want to watch your costs when it comes to investing because they will eat you alive over time.

To start, you have to open an account. You can do so with many firms such as Vanguard, Charles Schwab, Fidelity, T Rowe Price, etc. The amount you need to start varies by firm. Usually once you open an account, you can set up a re-occurring monthly transfer for as little as $50-$100/month.

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A mutual fund could be an index fund.

An active mutual fund will select certain investments and use management skills to try and outperform the market (index).

An index fund will be passive and just track an index.

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I need help I keep hearing these investing strategies but What are the differences between the two, which is better? How much money do you need to start and how do I start?