Volume 16: The Lockshield Letter
Mar 31, 2026
Episode 19: Index Funds
Index Fund Basics
Episode Description
In this episode of the LSP Podcast, we dive into the world of index funds and why they’ve become a go-to investment strategy for many investors. At its core, investing in an index fund means “buying the whole market”—giving you exposure to a broad range of companies rather than trying to pick individual winners.
We explain how index funds work by tracking major market indexes like the S&P 500, allowing investors to tie their performance to the overall market. In contrast, actively managed funds aim to outperform the market—but while they may succeed at times, research shows that over the long term, the majority struggle to keep up. In fact, about 92% of actively managed funds have underperformed the S&P 500 over a 20-year period.
We also break down one of the biggest advantages of index funds: cost. With significantly lower expense ratios than actively managed funds, index funds allow investors to keep more of their returns over time.
If you’re looking for a simple, cost-effective way to invest and build long-term wealth, this episode will help you understand why index funds are such a powerful tool.
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