E Should You Invest In Index Funds?

Volatility in the stock market spiked towards the end of last month as investors prepared for a rate cut in August. And since the start of the month. CBOE Volatility Index (VIX) has gained further topping the 25 points mark before pulling back to stabilize at around the 22 points level.

As demonstrated using the CBOE Volatility Index chart below, the VIX appears to have spiked significantly since the start of  2018. In 2017, the VIX oscillated between 9.5 and 11.5 basis points, with an average of about 10.5 points. However, dynamics have since shifted as uncertainty continues to grow in the market with the raging US-China trade war playing a part.

In 2018, the CBOE Volatility Index made two major spikes, the first coming in at the end of January and the second arriving towards the end of the year in December. This year has been a little calm, witnessing a couple of spikes, first in May and then this month.

This makes investing in individual stocks tricky for investors, which is why diversification is key. For retail investors with limited investment capital, it can be more challenging to diversify investments by investing in individual stocks. This is why investing in index funds can be crucial, especially for those who would prefer using a passive investment vehicle.

And while volatility has gone a notch higher thereby making it more interesting to stock pickers than long-term investors, the intricacy of picking the right stocks at the right time can be very challenging to inexperienced investors. The good thing, for now, is that even with the current market turbulence the general trajectory of stock prices remains positive, which makes index funds ideal for passive investors not interested in the short-term trading opportunities created by volatility. To get investors started, here are a couple of index funds that stand out for various reasons.

Fidelity ZERO Large Cap Index Fund

As the name suggests, the Fidelity ZERO Large Cap Index Fund (FNILX) has no expense ratio, which means that if you invest $10,000 in it you will incur $0.00 in expenses at the end of the year. 

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Disclosure: The material appearing on this article is based on data and information from sources I believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does ...

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