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Same Index Fund Different Returns On Equity

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July 07, 2012 - Same Index Fund Different Returns on Equity - by Morningstar Investment Research

I've been shopping around for index funds and noticed that mutual funds and exchange-traded funds that track the same index often have different returns. Why is this?

Morningstar assistant site editor Adam Zoll recently addressed this question, mentioning that indexing has become an increasingly popular investment strategy, with about $55 billion in new assets added to index mutual funds (not including ETFs) during each of the last three years, according to the Investment Company Institute. The popularity of indexing has helped spur the growing interest in exchange-traded funds, the majority of which track indexes. But, as the reader noted, not all index funds and ETFs are created equal. In fact, there are a few different factors that cause some funds or ETFs to track their indexes more closely than others.

Don't Sabotage Your Retirement to Pay for College

Given the flagging job prospects for new college grads, as well as the soaring higher-education costs, it's only natural that families are paying attention to the payoff potential of various schools and degrees. But by multitasking as so many parents do--saving for college and their own retirement at the same time--they run the risk of coming up light on the retirement front with no way to make up for the shortfall, except for working longer. The old saying about this topic is dead-on: Your child can get a loan to pay for his or her college education, but no one will give you a loan to pay for retirement if it turns out you haven't saved enough. Given increasing rates of longevity, rising health-care costs, and what many expect will be only so-so returns from the stock and bond markets in the decades ahead, Morningstar director of personal finance Christine Benz asked can anyone ever really be sure they'll have enough money on which to reti re?

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