and your fund’s load-adjusted total return. Remember, index funds need a minimum amount of management compared with growth or income funds, simply because index funds buy and hold stocks and don’t engage in frequent port folio shuffling. Jon Teall, a spokesman with Lipper Analytical, says that the best gauge of what your index fund is charging you is the fund’s expense ratio, which you can get from Morningstar sheets or from your financial planner. A lean .2% ratio posted by the Vanguard Group (800-205-6189), which invented the first index fund in 1976, is widely touted as the industry standard. Much above that figure, and your fund will stray from the index and fritter away your returns.
Is index investing for you? Teall says your first consideration should be the stocks in the index. “The S&P funds do best when large capitalization stocks have gotten a boost from the economy, and they’ll lag behind other funds in years when small companies are doing better in the market.” Teall also recommends looking for fund families such as Vanguard and Fidelity (800-544-8888) that allow you the opportunity to switch out of an index when you feel market factors call for it. They also offer you a wide variety of funds to choose from.