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By Christine Benz | 06-12-2008 01:25 AM

Identifying the Best Index Funds

The key criteria to keep in mind.

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Christine Benz:  Hi, I'm Christine Benz from Morningstar. Buying index mutual funds is an easy way to simply your investment life. You won't be able to beat the market but you will be able to come close to its return, and that's better than most active stock and bond pickers have managed to do over long periods of time. The real beauty of indexing though is that you can build a very streamlined portfolio that needs very little in the way of day-to-day oversight. For that reason, index funds can be a great choice for investors who don't have a lot of time to devote to their investments.

Unfortunately choosing the right index funds for you isn't all that simple. Index funds, both conventional mutual funds and exchange traded funds, have exploded in popularity over the past decade.

To help narrow down the field, I'd suggest you turn to Morningstar's Premium Fund Screener which is located on the tools cover page of Morningstar.com. The Premium Screener helps you narrow down the field of traditional mutual funds to those that are worthy of more research. Start by selecting the fund category that you would like to investigate.

Let's assume we are looking for a broad-based core stock index fund and most of these funds land in the large cap lend category. From there we will want to home in on all of the index funds that land in this category.

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