Stock market has many indexes to gauge the economy. The most well known index is Standard and Poor's 500 index (SP500). SP500 is an index of 500 largest public companies in the USA. Over 10 years period, most of the actively managed mutual funds doing the same style of investment can not beat SP500. The found of Vangard company thought of creating index funds that matches SP500 performance. Vanguard index funds are less expensive than traditional mutual funds because they require alot less management and trading. Not to mention index funds do alot better than actively managed mutual funds.
Problem: actively managed mutual funds are expensive and do not work better than index funds
Idea/Solution: passive investment + less expensive ==> index funds
Site: http://Vanguard.com
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