The Ease of Index Funds Comes With Risk


J.B. Hunt Transport Services, one of the largest trucking companies in the United States, trades at a much higher price relative to earnings than its rival Swift Transportation. CreditKC McGinnis for The New York Times

The logic of investing in index funds has so far seemed simple and compelling for growing numbers of people.

Why spend the time researching individual securities and run the risk of choosing the wrong stock in the wrong sector when you can simply buy the market as a whole? Put your money in an exchange-traded fund, or E.T.F., or in a traditional mutual fund that passively tracks a stock index like the Standard & Poor’s 500 or the Russell 2000 and you have instant diversification without the risk of error in security analysis. The fees for such funds are typically very low, too. And E.T.F.s are traded all day, making for easy entry and exit…

The Ease of Index Funds Comes With Risk

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