If you’ve ever thought, “I should invest, but I have no idea where to start,” welcome to the club.
Here’s the good news though. You don’t need to be the next Warren Buffett to grow your money. Consider investing in index funds, the ultimate set-it-and-forget-it investment strategy.
What Even is an Index Fund?
Imagine an index fund as a big basket. This basket is filled with various stocks, and these stocks represent the market.
You can buy a tiny piece of everything in a certain index, instead of picking individual stocks (and possibly picking wrong).
For instance, the S&P 500 follows 500 of the largest U.S. companies. If the market value increases, the value of your investment increases as well.
Should You Care?
Yes, you should. Here’s why:
- Index funds tend to outperform most investors. Even professional fund managers often can’t beat the market over time.
- Index funds have super low fees compared to actively managed funds. Less money going to fees ideally means more money in your account.
- The stock market has historically gone up over time. That means the longer you stay invested, the more your money can grow.
- There’s no stock-picking stress or staring at charts all day long. Just invest and go live your life.
How to Invest in Index Funds
- Select a brokerage: Consider choosing reputable firms like Vanguard, Fidelity, or Schwab for your investment platform.
- Pick your Index Fund: A solid starter choice could be the S&P 500 index fund (Vanguard’s VOO or Fidelity’s FXAIX are also great options).
- Invest consistently: Put in a set amount every month (yes, even when the market is down). This is called dollar-cost averaging, and it helps smooth out market fluctuations.
- Forget about it: Seriously, the key to building wealth is staying invested for the long haul.
Index funds are about as close as you’ll get to automated wealth-building.
They take the guesswork out of investing and let you focus on other things. So if you want your money to work for you while binge-watching your favorite shows, this may be the way.
