Index Investing For Dummies

A recommended, proven way to broaden portfolios and profits

Recommended by finance experts and used extensively by institutional investors, index funds and exchange-traded funds (ETFs) provide unmanaged, diversified exposure to a variety of asset classes. Index Investing For Dummies shows active investors how to add index investments to their portfolios and make the most of their money, while protecting their assets. It features plain-English information on the different types of index funds and their advantage over other funds, getting started in index investing, using index funds for asset allocation, understanding returns and risk, diversifying among fund holdings, and applying winning strategies for maximum profit.

Introduction 1

Part I: The (Mostly) Nonviolent Indexing Revolution 7

Chapter 1: What Indexing Is and Isn’t 9

Chapter 2: A Short History of the Index and Index Investing 19

Chapter 3: Why Indexing Works — and Works So Darned Well 33

Chapter 4: Why Everyone Isn’t Indexing 45

Chapter 5: A New Era Begins: ETFs and Alternative Indexes 59

Part II: Getting to Know Your Index Fund Choices 73

Chapter 6: The Basic Index Investing Components 75

Chapter 7: Investing in Stock Indexes: Your Gateway to Growth 95

Chapter 8: Investing in Bond Indexes: Protecting Your Principal 133

Chapter 9: Diversifying Your Portfolio with Commodity, REIT, and Other Indexes 151

Part III: Drawing a Blueprint for Your Index Portfolio 171

Chapter 10: Finding a Happy Home for Your Money 173

Chapter 11: Developing Your Broad Investment Goals 185

Chapter 12: Fine-Tuning Your Index Selections 197

Chapter 13: Mixing and Matching Passive and Active Investing 209

Chapter 14: Making Your Final Investment Decisions 225

Chapter 15: A Bevy of Sample Index Portfolios 233

Part IV: Ensuring Happy Returns 245

Chapter 16: Buying and Holding: Boring, But It Really Works 247

Chapter 17: Seeking Additional Assistance from Professionals Carefully 259

Part V: The Part of Tens 269

Chapter 18: Ten Ways to Deal with the Temptation to Beat the Market 271

Chapter 19: Ten Ways to Screw Up a Perfectly Good Index Portfolio 277

Chapter 20: Ten Q & As with John Bogle, Father of Index Investing 281

Part VI: Appendixes 287

Appendix A: A Select List of Index Mutual Funds 289

Appendix B: A Select List of Exchange-Traded Funds 297

Appendix C: Helpful Web Resources for the Smart Index Investor 315

Index 321

Russell Wild, MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.

Broaden your portfolio and your profits with this plain-English guide

Interested in index funds? Want to invest your money wisely? This plain-English guide explains a recommended, proven way to use index investments to build a well-diversified,low-cost portfolio. Whether you're a conservative or aggressive investor, you'll see how to find the right funds that provide healthy long-term returns — and stay afloat in tough economic times.

• What are index funds, anyway? — learn how index mutual funds and exchange-traded funds work and their advantages over other funds

• Evaluate your index fund choices — from stocks and bonds to commodities and real estate, understand the risks and rewards

• Make the right investing moves — discover your investing style, your connection to the market, and your long-term financial needs

• Develop your portfolio blueprint — decide how many funds you need, where to house them, and whether to mix index funds with other investments

• Manage your money wisely — disaster-proof your portfolio, correct your mistakes, and get help from the pros if you need it (but tread carefully!)

• Ensure happy returns — see how to maintain a smooth-running, age-appropriate, profitable portfolio for years to come

Open the book and find:

• Clear explanations of index funds — and why they work

• How to avoid the temptation to beat the markets

• Evaluations of popular index funds — the best and the worst

• Sample portfolios, from conservative to aggressive

• Lists of index mutual funds and ETFs

• Web resources that help you stay up-to-date

• A Q&A with John Bogle, founder of Vanguard