Answer: Index Funds

Watch the first four minutes of this video to learn more about Jack Bogle's incredible innovation which has helped millions of investors (including many of our readers I am sure!): 

Questions:

• In your own words, what is an index fund? 
• Why did Bogle believe that trading individual stocks was "a loser's game"? 
• Why have index funds become so popular compared to funds that try and beat the market (active funds)? 

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

Additional info: 

A real hero in finance died today. Jack Bogle, founder of Vanguard Group, created an investment juggernaut that now has over $5 trillion in assets. He created a company with a unique structure in the investment industry in that the owners of Vanguard mutual funds are the owners of the company. Instead of accumulating billions in wealth, this structure meant investors would be the ones that benefited as Vanguard consistently drove down the cost of their funds leaving more for investors. Here's what Warren Buffett had to say upon Jack's passing: "He did more for American investors as a whole than any individual I have known." What an example of servant leadership. He left the world a better place. 

Here are just one of the many tributes rolling in The Worth of A Man: A Tribute To Jack Bogle (Forbes). 

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Want a quick and easy graphic to explain to your students what an index fund is? Check out this site and, yes, we do have an activity worksheet too! 

This is the S&P 500 (size of the box represents market capitalization, percentage represents change in stock price on 1/16, red = negative return, green = positive return)

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.