The largest misconception about index funds is that their only distinguishing feature is their fees. It’s not uncommon to hear, “index funds are just holding the stocks or bonds in the index, so we don’t need to pay attention to them.” This assumption, however, is an oversimplification. Many investors don’t realize that all index funds are not created equally.
A key difference between indexes and index funds is that index funds are exactly that – funds. Index funds manage obstacles that indexes themselves don’t face. The largest is that funds actually must transact in securities whereas indexes do not. September 2014
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