Step 3 of 5 — Index vs. active funds
Compare long-term performance of index funds vs actively managed funds after all fees.
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Next Step: Rebalance your portfolio
Index value = Investment × (1+gross-fee)^years. Active value same but with higher fee. Even a 0.5% fee difference compounds to massive wealth gap over 30 years.
Over 15+ years: 85-90% of active funds underperform their benchmark. After fees and taxes, the gap widens. Warren Buffett recommends index funds for most investors.
Fees: 0.03% vs 1%+. Tax efficiency: lower turnover = fewer taxable events. No manager risk. Automatically buy winners as they grow in the index.
In specific niches (small-cap, emerging markets), skilled managers occasionally add alpha. But identifying them in advance is nearly impossible.
VOO (Vanguard, 0.03%), FXAIX (Fidelity, 0.015%), SWPPX (Schwab, 0.02%), IVV (iShares, 0.03%). All are excellent — minimize fees and tax drag.
Markets don't reliably signal when to time in or out. Stay invested through both. Time IN market beats timing THE market — consistently.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.