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<blockquote data-quote="simme" data-source="post: 1746808" data-attributes="member: 40418"><p>I use the Fidelity Total Market Index Fund FSKAX. It is an index of the total market, so a little more broad than the S&P 500. As of March 31, 2022, 1 year return of 11.67%, 3 year return of 18.12%, 5 year return of 15.32, and 10 year return of 14.21. Life of fund (1997) annual return is 8.74%. </p><p></p><p>Index funds are as volatile as the index they follow, total market in this case. But not as volatile or risky as individual stocks. Index funds spread the risk out. More risk has possibilities of bigger returns or bigger losses depending on how smart or how lucky you are. Striving for maximizing your return carries the risk to minimize your return. Individual stocks may have a return of over 100% some years, but maybe -80% some years. </p><p></p><p>Actively managed mutual funds with a high turnover will probably generate a higher tax bill each year. Actively managed means that there is a manager that is buying and selling regularly trying beat the market and other managers in order to increase his reputation and compensation. That means higher fees, more capital gains (or losses) to deal with each year (taxes) and the possibility that the manager may make bad decisions (losses). Index funds are not actively managed, just managed to reflect the index that they represent. Lower fees and less taxes until you sell. That Fidelity total market fund has an expense ratio of 0.015% per year (actively managed funds may be 0.5 to 2% or more). Turnover is 3%. Actively managed funds may be 50% or much higher.</p></blockquote><p></p>
[QUOTE="simme, post: 1746808, member: 40418"] I use the Fidelity Total Market Index Fund FSKAX. It is an index of the total market, so a little more broad than the S&P 500. As of March 31, 2022, 1 year return of 11.67%, 3 year return of 18.12%, 5 year return of 15.32, and 10 year return of 14.21. Life of fund (1997) annual return is 8.74%. Index funds are as volatile as the index they follow, total market in this case. But not as volatile or risky as individual stocks. Index funds spread the risk out. More risk has possibilities of bigger returns or bigger losses depending on how smart or how lucky you are. Striving for maximizing your return carries the risk to minimize your return. Individual stocks may have a return of over 100% some years, but maybe -80% some years. Actively managed mutual funds with a high turnover will probably generate a higher tax bill each year. Actively managed means that there is a manager that is buying and selling regularly trying beat the market and other managers in order to increase his reputation and compensation. That means higher fees, more capital gains (or losses) to deal with each year (taxes) and the possibility that the manager may make bad decisions (losses). Index funds are not actively managed, just managed to reflect the index that they represent. Lower fees and less taxes until you sell. That Fidelity total market fund has an expense ratio of 0.015% per year (actively managed funds may be 0.5 to 2% or more). Turnover is 3%. Actively managed funds may be 50% or much higher. [/QUOTE]
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