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The Short Answer

Watch Your Weightings When Investing in Index Funds

Various indexing methodologies offer different strengths and weaknesses you should keep in mind.

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Question: I invest in an S&P 500 index fund, which I know weights companies by their market value. What are some other weighting methods used by index funds?

Answer: Index funds have become an increasingly popular choice for investors, representing nearly 15% of all mutual fund assets today. All told, about $1.3 trillion is invested in U.S.-based index mutual funds, with a comparable amount invested in index-based exchange-traded funds.  

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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