Choosing the Right Funds for Your Needs
The best long-term investments for most investors generally consist of stock mutual funds, especially index funds. It doesn’t make much sense, though, to invest in stock mutual funds unless an investor has at least three years before starting withdrawals.
Index funds also make smart choices for long-term investing. Vanguard’s index funds are among the most popular holdings for long-term investors and have attracted such a large amount of investor assets that Vanguard Investments has become the largest mutual fund company in the world.
Vanguard index funds make smart choices for long-term investing because index funds are passively managed and have lower expense ratios than actively-managed funds. Also, since the expense ratios for index funds are so low, they offer a long-term advantage for performance.
This is because most fund managers for active funds don’t beat the major market indexes for periods longer than 10 years. So, rather than trying to beat the market, which is difficult to do consistently over the long run, you may as well invest in funds that match the market at a lower cost. This is the essence of index funds.