By Indexopedia Research Team | September 24, 2024 | In
Market indexes come in various forms, primarily through exchange-traded funds (ETFs), mutual funds, and institutional indexing. While each approach provides exposure to a diversified pool of assets, the way they operate and the benefits they offer can vary significantly. As an affluent investor, understanding the differences between these methods can help you make better decisions based on your personal goals, the size of your portfolio, and your need for control, transparency, and cost efficiency. Let’s unpack the three primary ways of index investing, with a focus on equity and fixed-income strategies: mutual funds, ETFs, and institutional indexing. Index Mutual Funds: A Foundational Tool The concept of the index mutual fund was popularized in the 1970s by John Bogle, founder of Vanguard. Vanguard’s index funds allowed small investors to gain exposure to the entire market by pooling their money together, creating a cost-efficient way to invest in a broad range of stocks or bonds. This innovation gave investors with as little as $100 the ability to invest in diversified portfolios that would otherwise be out of reach for individual investors. In an index mutual fund, the