Small Cap Fund vs Index Fund?
Question by The saint: Small Cap Fund vs Index Fund?
Hi. I’m opening a Roth IRA and I’m looking into mutual funds as an investment. Will I be better if I invest in Small Cap Fund or an Index Fund? Or should I pick a mix of both? Some firms offer a fund of funds meaning the fund you buy is made up of many funds, so is this also a possibility?
Best answer:
Answer by Jerry
A small cap fund invests in smaller companies, typically market cap of less than billion.
An index fund follows a particular benchmark rather than actively selecting stocks. It is a passive investing style rather than active.
Small cap and index fund are not competitors or alternatives. There are large cap index funds, small cap index funds, international index funds, etc.
Opening a Roth IRA is a great idea. I suggest looking at Vanguard which is the lowest cost provider of mutual funds. Their web site has some good educational material. You really should study more before investing. It is reasonable to call them and ask questions.
Do not buy load funds. These involve up-front fees that pay a broker while doing nothing for you. You want only no-load funds.
What do you think? Answer below!
Depends on your age and attitude …… meaning…if you’re young and have time to weather ups and downs, the small-cap will probably make you more money…..but if you want to be ” conservative” and safe, you chug along as the whole economy does with an index fund. ( Unless your index is IN a volatile sector ).