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Wall Street Myths – Part 1: Index Funds

All this week, veteran trader Gary Kaminsky debunks Wall Street myths in an effort to make you smarter than the Street.

In part 1 of our 4 part series, 'Sky' talks index funds.

They seem attractive on the surface -- whether you’re looking at the S&P 500, the Dow, the Russell or some other benchmark, - if you’re bullish you should put money to work in index funds – right?. After all, if the index goes up you’ll profit.

That's what we thought too - but in his new tell all "Smarter Than The Street”-- Kaminsky debunks some commonly held beliefs that may seem like sound investment ideas on the surface.

First myth – Index Funds are the best way to invest.

"When you’re indexed you’re fully invested and what the last decade has taught us is being fully invested 100% of the time is not the right strategy," says Kaminksy.

Instead 'Sky' thinks it's much smarter to identify a handful of stocks that meet your pre-determined criteria (growth, dividend-payers, value names etc.) and make your moves accordingly.

And for those of you who argue you just want to park money in a fund and index funds are less expensive - Kaminsky doesn't buy it. "The idea of just putting money into an index fund because it has the lowest fee structure is a false strategy," he says.

Also he adds that some money managers are well worth those higher fees you pay, the trick is to do your research.

Check out our entire conversation about Index Funds and why Gary isn't a fan. Watch the video now!

Click here to go to McGraw Hill's website and check out Kaminsky's book "Smarter Than The Street: Invest and Make Money In Any Market


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Trader disclosure: On Oct. 25, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (F), (NOK); Finerman owns (AAPL); Finerman & Finerman’s Firm owns (BAC); Finerman owns (GOOG); Finerman & Finerman’s Firm owns (JPM); Finerman’s Firm owns (HPQ); Finerman’s Firm owns (MSFT); Finerman’s Firm owns (SKS); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Terranova owns (APA), (AAPL), (AXP), (C), (GOOG), (GS), (IBM), (ISRG), (MCD), (MDT), (MMM), (NKE), (ORCL), (OXY), (PEP), (PFE), (PCP), (UPL), (VRTS), (XBI); Weiss owns (QCOM), (AKAM), (VZ), (TXN), (COP), (NIHD)

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