Tracker Funds Continue to Stand the Test of Time

Investing in a tracker fund has been a popular choice for many investors over the years. Historically, this type of fund tends to outperform most other mutual funds in the market. Here are a few things to consider about tracker funds and why they are so successful.

Tracker Funds

This type of fund is also referred to as an "index fund." A tracker fund is a mutual fund that tries to mimic the movements of a particular financial index. Therefore, if the index moves up or down, the tracker fund will have a corresponding movement. This is accomplished by purchasing stocks that make up the financial index. The stock purchases might be weighted towards the top of the index, or the fund could be proportionately an exact representation of the stocks in the index.

Reason for Success

Financial indices are designed to show the movement of the stock market as a whole. Traditionally, the stock market has always trended upwards over time. Therefore, if you can replicate the movement of the market, you will be able to realize a return on your investment. Since a tracker fund can successfully stay with the market, your investment will also have a nice upward growth curve.

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