Invest Cheaper With This Simple Tip

Investors have been paying less to invest in mutual funds, according to recent data from the Investment Company Institute. But behind those numbers are a trend that you should consider for your investing.

In this following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the lower expenses that mutual-fund investors have been paying. Dan notes that the overall average fee is falling because more investors are gravitating to low-cost index funds. Dan points out that index funds almost always have much lower expenses than actively managed funds, and they can also be effective in helping you invest in popular indexes like the Dow Jones Industrials (DJINDICES: ^DJI  ) and the S&P 500 (SNPINDEX: ^GSPC  ) . But Dan warns that with smaller markets, indexing can distort markets by focusing on a small number of stocks and leaving out others. Dan concludes that indexing is right for many people, but you have to know what your fund owns.

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