Investing in the Stock Market the easy way : Index Funds

An index find allows you to enjoy most of the good parts of a mutual fund with little of the bad. By simply buying all the stocks in a particular index - - the fund buys the entire stock market, not just a few stocks. The most popular index funds track the Standard & Poor's 500, the NASDAQ 100 (the 100 largest tech companies) and the Russell 2000 - a cross section of small companies.

An S&P 500 index fund owns 500 stocks - a cross section of the American economy. This is the key distinction between index funds and "managed: mutual funds. The manager of an index fund doesn't have to worry about which stocks to buy or sell - - he or she only has to buy the stocks that are included in the fund's chosen index.

Investing in index funds is often called passive indexing since the funds don't use the same management techniques as other funds.

The main advantage of index fund investing is that index funds have a tendency to perform better than most managed mutual funds. According to John Bogle, founder of the Vanguard Family of Funds, better than 80 percent of all mutual funds that were set up to beat the S&P 500 fail to meet that goal. When you think about it, that's an amazing statistic - - eight out of ten mutual funds don't beat the S&P 500 measured market! That happens to be true for the past 5, 10, 15 and 20 year periods.

But even an index fund cannot protect you from persistent bear markets like that of the past three years. Such markets call for active index management - - i.e., moving the index fund in and out of the market to take advantage of changing trends. That's what market timers attempt to do.

Now just suppose - -that you had the tools to identify market trends.

And suppose further - - that you had the option of selecting index funds that have an inverse correlation to the index i.e., they move opposite to the market and increase in value when the market goes down, and vice versa. Wouldn't it stand to reason that you would then have the possibility to make money in both rising and falling markets?

That's the objective of LBS' Index and Sector Investing Strategies

The Index and Sector Investing Strategies offered by LBS Capital Management use Rydex Index funds designed to track the market both positively, and inversely, and applies LBS' advanced investment technologies to these funds in an attempt to take advantage of whatever direction the market is taking.

Click here to learn more about the Index and Sector Investing Strategies