5. Avoid Market Fluctuations by Investing in Index Funds
A recent Fidelity survey found that 51 percent of investors believe index funds are more stable than actively managed funds. Meanwhile, a fifth of investors surveyed believes stock index funds can protect them from market fluctuations. However, both index and active stock funds carry market risk — meaning that returns follow the market.
“The average S&P 500 fund has experienced large swings in one-year performance, whether that fund is active or passive,” the Fidelity report noted.
