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Don't look for the needle in the haystack. Just buy the haystack! - John C Bogle
Choosing stocks/bonds wisely and building a robust portfolio can be a challenge for many. Even experts find it difficult. And more often than not, they don’t beat the market. This is when Index funds come handy.
An Index fund is a simple, straightforward and low-cost investment vehicle helping you invest in assets like stocks, bonds and commodities.
It follows a passive investment strategy by tracking a particular index irrespective of the market situation.
An Index Fund manager does not try to beat the market, nor they pick stocks or time the market by actively buying and selling. They simply invest in all companies forming the index to match market returns and risk.
On the contrary, Active fund managers use their research and judgment to invest in assets that they think will grow the most. However, it is easier said than done, that is why index funds perform better than actively managed funds 90% of the time.
As we all know that the market movements are typically broad, even if a few stocks in an index don't perform well, others may compensate.
Vanguard 500 Index Fund Admiral Shares (VFIAX) is the first index fund for individual investors. It has more than $500 Billion of assets under management.
When you invest in this fund, you technically invest in 500 of the largest U.S. companies of many different industries accounting for almost 75% of the U.S. stock market's value.
Like all market-linked investment, Index funds are also subject to market risks. The value of your investment can go up or down according to market conditions. However, prudent asset allocation and regular rebalancing of your portfolio can mitigate this risk to a large extent.
There are two ways you can start an Index fund investment;
As an Independent Financial Advisor, I can help you build an Index fund investment portfolio to achieve your financial objectives.
Arrange a Free Consultation to set the ball rolling.
Author, Blogger & Independent Financial Advisor. My goal is to give you actionable tools for creating passive income and building wealth. More than 10,000 expats have already used my ideas to jumpstart their journey towards financial independence. Connect with me to start yours...
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