But already, he is considering branching out into exchange-traded funds, or ETFs, a relatively new class of index funds that are bought through a broker like stocks and trade throughout the day. Traditional index funds can be bought and sold only at each day's closing price. How They Work Index funds are designed to mimic the performance of the markets they track. Such statistics have caused some to question the wisdom of investing in index funds in what appears to be a slowing economy. But many experts say that's short-sighted.
Investment companies seem to have a positive outlook as well.
Not all index funds performed badly in 2000, either. Flows into those categories also rose significantly. When it comes to choosing an index fund in today's diversified marketplace, investors need to ask a host of questions. Vanguard introduced its 500 Index Fund, the first retail index fund, in 1976, but it took several years to catch on. Even while acknowledging that the new index-fund categories offer investors more alternatives, as well as a way to beat the high expenses of actively managed funds, many experts suggest approaching them with caution.