I am a HUGE proponent of passive investing, and I often tell people that I think using index funds to construct your portfolio is a very solid approach. However, it is NOT without some costs and trade-offs.

One thing that a lot of people DON’T think about is: “How do they decide which stocks are in or out of an index?” Think about it for a minute—do you really know what companies make up the Dow Jones Index? How about the S&P 500 Index? Or what about the Russell 3000 Index?

It’s OK if you do not. However, it is NOT OK if you believe that these indices are somehow “fixed in stone.” Every index undergoes a “reconstitution” periodically. That IS a good thing. But it also introduces costs that need to be considered.

The linked article goes into detail on this topic. Read the article here.

• Are you interested in exploring the role index funds can play in building your portfolio?

If so, would you like some help to better understand this topic?

Feel free to send us an email or give us a call. We’d love to have the opportunity to hear about your situation and your thoughts on this post.

Enjoy the read and remember, it’s NOT about the money. It’s about how the money supports your goals!

About F5 Financial Planning

 F5 Financial is a fee-only wealth management firm with a holistic approach to financial planning, personal goals, and behavioral change. We provide insight and tailored strategies that inspire and equip our clients to enjoy a life of significance and financial freedom.

At F5 Financial Planning we focus on helping individuals and families find balance between faith, friends and family, fitness and finance.  We make sure that they have the financial freedom to enjoy those things in life that are important to them.  And while we believe the left-brain facts and data are critical; we work with our clients to get them in the right state of mind to focus on the goals they want to achieve.

Some other posts that you might like:

• Should You Pay Off Your Mortgage?
• How Are DFA Funds Different than Index Funds?
• How Families Can Calculate Retirement Income Wants Versus Needs
• What Your Grandma Taught You About Investing
• Making Sure You Can Collect a Paycheck in Retirement

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F5 Financial Planning provides fee only financial planning services to Naperville, Plainfield, Bolingbrook, Aurora, Oswego, Geneva, St. Charles, Wheaton, Glen Ellyn, Lisle, Chicago and the surrounding communities.  Curt Stowers is a fee only financial planner.  He has passed the CFP® examination.  Contact or visit Curt at his Naperville location.

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