Looking for a Little Fund Activity?

Well, it's better than daytrading.

As the equity markets continue to churn, investors are flocking to actively managed funds in hopes of beating a losing market. But market timing rarely works, even if you're paying someone else to pick the stocks for you.

Because it's nearly impossible to beat the market, the benefits of index funds are obvious. Since equities are the place to be for the long haul, it does pay to ride along with the market. Plus, there are the super-low costs of index funds. Because they require very little management, management fees are almost nonexistent. The "manager" simply adjusts how much of each stock the fund holds based on any changes in the underlying index (such as the S&P 500) or on whether cash must be raised for shareholder redemptions.

Also, the minimal trading in index funds means two more benefits: Transaction fees are much lower than in most other funds, and indexing creates better tax efficiency. (Fewer sales means fewer realized gains that would incur a tax.) ...