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Considerations on Investing in Index Funds

Author

Listed:
  • Alexandru Cristian Dobre

    („Lucian Blaga” University of Sibiu, Romania)

  • Tatiana Ioana Stanese

    („Lucian Blaga” University of Sibiu, Romania)

  • Cătălin Florin Zeti

    („Lucian Blaga” University of Sibiu, Romania)

  • Mihai Aristotel Ungureanu

    (Romanian-American University of Bucharest, Romania)

Abstract

People around the world are trying to find different solutions to keep their money. Not only will they keep money but also want to invest it to achieve capital growth on this investment. In common knowledge putting money in the bank is the best decision to save money while the interest rate programs in banks are three to four times lower than capital appreciation by placing savings within ETFs (Exchange Traded Funds), index funds or similar devices.The very idea of investing in shares can bring us to a defensive thinking of taking risks, but what happens if we think long-term? Banks currently offers an interest rate of 2-3% per year at a maximum rate of interest that is actually even lower after taxation. Investing in index funds can make a capital increase of up to 10% per year over a period of 5-10 years. Do these investments involve risk? Are these investments guaranteed? What is the liquidity of the money invested? These are some questions that we will try to answer in this article observing the reality that exists in their management and short history.

Suggested Citation

  • Alexandru Cristian Dobre & Tatiana Ioana Stanese & Cătălin Florin Zeti & Mihai Aristotel Ungureanu, 2017. "Considerations on Investing in Index Funds," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 17(1), pages 67-74.
  • Handle: RePEc:pet:annals:v:17:y:2017:i:1:p:67-74
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    More about this item

    Keywords

    index funds; ETF; mutual funds; capital growth; investment;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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