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Index Funds
What are Index Funds?
We lead extremely busy lives. Some of us simply don't have the time to play an active role in our investments. If you're looking for a passive investment strategy with low fees, index funds can be a good option. They're designed to track and perform like market indices. Index funds purchase securities that make up a market index. These funds attempt to match the market instead of trying to beat it.
Key Highlights
Index Funds vs Actively Managed Funds vs ETF
Explore the differences between fund types.
|
Index Fund (Passively Managed) |
Actively Managed Fund |
Actively Managed Exchange Traded Fund (ETF) |
|
|---|---|---|---|
|
Overview |
Track the performance of market indices to yield market-average returns |
A pool of pre-selected securities that seek to outperform the market |
A collection of securities that trade on a stock exchange |
|
MER |
Lower expense ratio |
Higher expense ratio |
Lower expense ratio |
|
Management |
Requires a fund manager |
Requires a fund manager |
Requires a fund manager |
|
Fees |
They may have management fees |
They have both transaction and management fees |
They have both transaction and management fees |
Index Fund FAQs
Yes. TD Direct Investing gives you access to a wide variety of investment asset classes including index funds, mutual funds, ETFs, stocks and more. Commissions and fees apply depending on what you trade and your minimum account balance1. All you need is a self-directed investment account.
For some investors, index funds may be a low-cost way to spread their investment dollars across many different investments. They have a lower MER compared to non-index ETFs and mutual funds.
The stock market can be volatile and unpredictable at times. However, most market indices tend to rise in value over time. As index funds mirror the performance of market indices, while not guaranteed, they may be considered by some to be stable investments over the long term.
Index ETFs have no minimum, and you can buy as little as one share. Make sure to consider your capacity for risk before investing.
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