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It’s Your Business (Continued from page 8)


The tendency of securities prices to


return to their long-term average is overwhelming. At the end of the 1990s, famed investor Warren Buffett accurately predicted that stock markets would underperform in the coming decade because they had so grossly outperformed expectations for the previous twenty years. But with the price to earnings ratio now lower than its historical average of fifteen, the shoe is on the other foot, and this bodes well for the investor, should securities prices return to their long- term average.


Types of Index Funds


While Vanguard was the first to offer index funds to the public, now nearly every mutual fund company offers index funds of one kind or another. They include funds that are both broader and narrower than the classic S&P 500 index fund. The S&P 500 index fund is the world’s largest because, for most people, the S&P benchmark is synony- mous with “the market.” But by definition it only includes five hundred of the country’s largest companies. For those who want an even broader exposure, Vanguard and other providers operate “total stock market” index funds, which also embrace small and midsize companies. For those looking to invest abroad, there are also funds that invest in foreign indexes. Other funds, typically with “global” in their names, combine domestic and international exchanges.


At the other extreme from broadly diversified index funds are funds that invest in very tiny, targeted markets. The world of exchange-traded funds, which are bought and sold like stocks but managed like mutual funds, is rich with names like Financial Select Sector SPDR and iShares Dow Jones US Real Estate.


Bonds can be indexed as well as stocks. The archetype fund that includes bonds is the Vanguard Balanced Index Fund. The principle is the same: costs are rock bottom, and there’s no risk that the funds would be negatively affected by decisions made by a manager.


72


Departed GL Officers


Past Grand Esteemed Leading Knight Lawrence L. McBee, of the New Lexington, OH, Lodge, died December 31, 2011. Member McBee served as Grand Esteemed Leading Knight in 1983–1984. He served on the Board of Grand Trustees from 1977 to 1981 and on the Grand Lodge Lodge Activities Committee in 1976–1977. He served as special deputy from 1974 to 1976 and again in 1984–1985 and as district deputy for the South Central District of Ohio in 1960–1961. He was president of the Ohio Elks Association in 1972–1973.


Past Grand Tiler Lewis L. Nurnberger, of the Manistee, MI, Lodge, died December 25, 2011. Member Nurnberger served as Grand Tiler in 1984–1985. He served on the Grand Lodge New Lodge Committee from 1976 to 1978, on the Grand Lodge Government Relations Committee from 1979 to 1981, and on the Grand Lodge Lodge Development Committee from 1981 to 1984. He served as special deputy from 1987 to 1989 and again in 1990–1991 and as district deputy for the West Central District of Michigan in 1959–1960. He was president of the Michigan Elks Association in 1967–1968.


Past District Deputy A. Bern Collins, of the Morristown, TN, Lodge, died November 28, 2011. Member Collins served as district deputy for the Upper East District of Tennessee in 1987–1988 and as district deputy for the East District of Tennessee in 2008–2009. He was president of the Tennessee Elks Association in 2003–2004.


Past District Deputy George A. Cully, of the Randolph, MA, Lodge, died July 16, 2011. Member Cully served as district deputy for the Circle District of Massachusetts in 1974–1975.


Past District Deputy Edward W. Czechowski, of the West Citrus, FL, Lodge, died October 5, 2011. Member Czechowski served as district deputy for the Central District of Florida in 2008-–2009.


Past District Deputy James Diacono, of the Santa Barbara, CA, Lodge, died December 12, 2011. Member Diacono served as district deputy for the West Central Coast District of California in 2003–2004.


Past District Deputy Charles H. Hinkle, of the West Citrus, FL, Lodge, died December 22, 2011. Member Hinkle served as district deputy for the Central District of Florida in 1991–1992.


Professional investors have many advantages over individual investors, from advanced degrees in finance to long experience. And one of the things they understand is their own particu- lar set of limitations: professionals are actually the biggest investors in index funds. But other investors are catch- ing up—hence the huge shift out of actively managed funds in the last five years. When stock prices swing back toward their historical average, index funds should make their shareholders a lot of money. ■


Answers to crossword puzzle on page 70.


A P R I L 2 0 1 2


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