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October 02, 2023 at 12:38 PM
Index funds have exploded in popularity since they debuted in 1976. Today, investors are pumping money into U.S. stock index funds and pulling money from actively managed ones, according to Morningstar research. Index funds focused on bonds and international stocks are also becoming more popular.
Why? The reason, according to many observers, is that buying and holding the broad market — whatever that market may be — generates better results than trying to beat that same market through the active selection of securities, Morningstar investment specialist Susan Dziubinski writes in a new blog post.
Morningstar research has confirmed that index funds in many investment categories have outperformed active funds over time.
Dziubinski notes that some index funds are better than others. The best ones, she writes, closely track their indexes, minimize costs and follow sensible rules-based indexes.
She says investors can start to search for top index ETFs and mutual funds with the Morningstar Medalist Rating. Funds with a Gold rating are those analysts expect to outperform over a full market cycle.
See the gallery for 17 mutual funds and ETFs that appear in one of the broad U.S. stock Morningstar categories, earn a top rating of Gold and have Analyst Assigned % — a measure of the involvement of analsyts in dertermining individual ratings — at least 80% as of Sept. 26.
Slides: Credit: Chris Nicholls/ALM
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