For instance, index funds do not eliminate market risk, which is the chance that the overall market for bonds or stocks will decline. Furthermore, nearly all true index funds will underperform their index over the long-term after accounting for fund expenses. Unlike actively managed funds, index funds cannot alter their holdings to defend against down markets, so they may drop more severely than a more diversified, actively managed fund during a market correction. The dominant index of the major international markets includes stocks in 21 developed countries outside of North America. British Telecom, Daimler-Chrysler, and Nokia are current stocks in the EAFE Index.
Past performance is no guarantee of future results.
The value and return of your investment will fluctuate with changes in market conditions. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of smaller companies may be subject to abrupt or erratic price movements. These companies also have fewer financial resources. The index performance is not illustrated of American Express Index Funds.