Glide Invest FAQ: Why are Index Funds so cheap?

Why are Index Funds so cheap?

In order to compensate the managers for their time and expertise for selecting stocks and managing the portfolio, a management fee is charged by active fund managers. Frequent buying and selling of stocks also leads to increase in trading cost. Index funds are passively managed, and follow a buy and hold portfolio strategy. Constituents of the portfolio seldom change, so fund manager’s role is minimized.  This is why index funds are cheaper than actively traded funds.
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