How to invest in Index Funds

What Is an Index Fund ?

Before investing in index funds; you probably want to know what index funds actually are. 
An index measures the overall market by seeing how a portfolio, or group of companies, is fairing.  Basically if a bunch of big and influential companies are doing well it predicts that the rest of companies in the country are doing well too; therefore, the market is doing good as a whole. 
Ideally when the index goes up, so does the rest of the market.  So when you invest index funds, you are investing in this.  

The big name index we hear in the news all the time is the Dow Jones create by Charles Dow in the 1800's. At the time it contained 12 of the largest public companies in the U.S., now it contains 30 of the companies. Judging by the success or lack their off these companies, we can guesstimate how the rest of the market is going to fair.

Investing in Index Funds 101

Want to own stocks of some of the most successful and well known companies in the U.S.? You can do this by investing in index funds. Index investing takes large companies into group, and track how they all do within the index. There are lots of different ones to choose from, and you've probably even heard the name of the original and most infamous index the "Dow".

Investments in index funds it the best investment in the stock market, because it matches the weather of the overall stock market. The fact is, stock folders managed by people haven't done nearly as good as index funds. They are one of the best way to check the temperature of the market.

You also save money, because you don't have to pay anyone to predict where the stock market is going. Then they invest your money in their hunches, which can often leave you broke.

Why I Like Index Funds

Index Funds are a huge part of the stock market! They are groups of the most successful and prestigious companies in the U.S. Looking at how those companies are fairing is a good way to judge the rest of the economy. Investing in index funds is a very sound investment.

Here are some of the reasons to invest in index funds:I'm lazy and busy.  It is a horrible combination.  So it is great that index funds take a minimal amount of time to manage

They are also very easy to manage, so it wasn't hard for me to figure out.They deliver better returns than most human managed funds due to their low costs.  Basically you cut out the middle man, so you make more profits.

They are highly recommended by people who make a lot more money than me (billionaires). People who invest for a living put their own money in index funds frequently.
Wall Street analysts seem to like them too.

Investing in Index Funds Is a Popular Investment Strategy

One of the most popular and safest ways to invest your money is by investing in index funds.  Many of the most popular investors recommend them. They have low costs due to the fact that they require only 0.1% to 0.35% of your assets annually.

This is relatively low compared to the 1% or higher for actively managed funds. Index funds are also simple to invest in. They aim to mirror a market barometer so they do not require monitoring. This is a great advantage for people who do not have the time to put into managing their investments.

Investing should not seem like a daunting chore. Investing in index funds can also deliver solid returns.
Index funds have beaten two-thirds of actively managed funds. Of course returns do not happen overnight. You have to maintain your patience and stick with it even when it doesn't seem to be working for you.

Index funds have consistently out -performed two-thirds of actively managed funds. 
They feature lower costs, easy management, lower turnovers, solid returns, and diversity.  One of the most popular types of index fund is the Exchange Traded Fund (ETF).  The main difference with these index funds is that they can be traded like stock.

Index funds can take very little time to manage. Because they mirror a market barometer such as Standard and Poor's, they need very little monitoring. These types of funds also deliver solid returns and involve lower expenses.
 
Index funds start at 0.1% asset investment annually, while actively managed funds can start at 1% or higher. The only trouble some have with Investing in index funds is that they become impatient.
You must have fortitude and stick with your index funds even when they don't seem to be working for you.

[posted by : OFP on Feb. 17, 2016]


TAGS: index fund, invest, how to

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