WSJ Headline: Index Funds Are the New Kings of Wall Street (w/Resources To Teach Your Students Index Funds)
Index funds (funds that mimic popular stock market indices like the S&P 500) now have more assets under management then active funds trying to "beat the market." Per the WSJ:
Funds that track broad U.S. equity indexes hit $4.27 trillion in assets as of Aug. 31, according to research firm Morningstar Inc., giving them more money than stock-picking rivals for the first-ever monthly reporting period. Funds that try to beat the market had $4.25 trillion as of that date.
The passing of the asset crown is the latest chapter in one of the most dramatic transformations in the history of financial markets. In the past decade, nearly $1.36 trillion in net flows were added to U.S. equity mutual funds and exchange-traded funds that mimic market indexes while some $1.32 trillion fled higher-costing actively managed counterparts.
Here's the chart showing fund flows over the past decade:
Yet, index funds can be a difficult concept to teach in high school classrooms which is why we have developed multiple engaging ways to increase student understanding.
Here's five activities to bring the concept of index funds to life for your students:
- STAX is an investing game where students make 20 years of investment decisions in 20 minutes. They are making decisions among 7 different investments every thirty seconds, compete against other students while the computer operates their own strategy in the background. What strategy would that be? You have to play STAX to find out.
- What's the S&P 500? interactive uses an awesome tool from the website, finviz.com, so students can visualize all the components of a popular stock market index while understanding the larger picture of our economy.
- Two MOVE activities, Let's Make A Mutual Fund and Organize A Stock Market Index get students out of their seats to play a role in building a stock market index.
- Two favorite videos explaining index funds come from Two Cents, What the heck is an index fund? and a conversation between LeBron James and Warren Buffett.
Want to further your own understanding of index funds? These podcasts will help:
- Jim Rowley of Vanguard Discusses Investing in Index Funds
- Charlie Ellis, an Investing Legend
- Investing Panel with Jonathan Clements and Bill Bernstein
- Look for new podcast on Friday from Index Fund visionary...Professor Burton Malkiel
About the Author
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.
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