Index Fund Investing for beginners: This is one of the best investments that requires very little work, almost no skill, and has some of the best overall returns. Here’s why – enjoy! Add me on Instagram: GPStephan
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What IS an index fund?
An index fund is basically just a group of investments that you can invest your money into, and then you’ll own a small percentage of the entire thing. Index funds track the entire market as a whole, rather than one specific stock.
Why Invest in an Index Fund: They have very low fees.
This is because indexes are very simple to put together, very simple to manage, there isn’t much overhead, and those savings get passed on to you. This is also what’s known as a PASSIVELY managed fund. You’re getting an entire portfolio of stocks that automatically gets balanced and adjusted over time, without doing any work, and you pay as low as 0.04% annually.
This is the opposite of a MUTUAL FUND, which employs professional stock pickers who aim to generate market-beating performance. However, the additional overhead expense associated with this, as well as the fees incurred by buying and selling, ultimately gets passed on to you, as the investor, in the form of higher fees. And that is WITHOUT the guarantee of actually beating the market.
Second Advantange: The majority of investors will get a HIGHER return long term with an index fund than they will by investing in individual stocks on their own.
Several studies have suggested that over 92%-95% of portfolio managers could not out perform the market index over a 15-year period. And these figures are SO MUCH WORSE for the average individual investors.
Third Advantage: Diversification.
Even if you have 20 individual stocks in your portfolio, one of them dropping in price could cost you a lot of money. On the other hand, if you buy the SP500 500 index fund, your investment will depend on 500 different stocks, only three of which account for more than 2% of the entire index. This means having a few companies go down or up won’t make a huge difference in your portfolio, but you get the advantage of riding the entire market as a whole as they rise in value over time.
Fourth Advantage: It’s easy.
I also acknowledge that I am not a stock market expert. I cannot buy and sell stocks that will consistently beat the market long term, nor do I have an interest in spending that much time watching stock charts and reading news so I can make the proper decisions.
Source:
How to do this:
My favorite index fund investing method is called THE THREE FUND PORTFOLIO:
* US Stocks: Vanguard Total Stock Market Index Fund (VTSAX)
* International Stocks: Vanguard Total International Index Fund (VTIAX)
* Bonds: Vanguard Total Bond Market Index Fund (VBTLX)
That’s it. This gives you the broadest diversification at the absolute cheapest cost. Not only that, but because you’re investing in multiple asset classes, you’re diversified through three mostly uncorrelated markets, and that protects you against any swings from one individual market.
Sources:
TIME IN THE MARKET beats TIMING the market: Charles Schwab.
Warren Buffet Millionaire Bet:
Beating the market:
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Obviously the more you invest the better but is there a minimal monthly that you should invest?
I'll forever be thankful to you you've changed my whole life continue to preach about your name for the world to hear you've saved me from a huge financial debt with just little investment, thanks so much Mrs. Ellen Riley.
❤❤
Green screen?
If I have all three of the basic ETF funds that Graham discussed, do I just keep investing money and buying more of the same shares each month?
Where do i invest? any app?
Is this still relevant today?
ETFs are for people with IQs below 280.
I recently inherited over $1 million. I REALLY need to make this money work for me, and not just disappear over time. I've been scrambling for somewhere to put the money, where I can make an effort to use the gains to pay bills so I can quit my job . All roads have pointed to the financial market of some sort which is a good idea buh where else should I put money besides the financial market? We have a 13% RPI rate so cash is tough.
Love your videos! Can you start with a small amount like $5000? And how much would you have to feed it? Monthly or yearly?
What freaking software do you go to for you to invest said “index Funds”
Like I don’t even know where to find this stuff lmao
smashed it!!
Well this is bad advice because I bought Amazon 20 years ago and made way more money than you ever did in your entire life
Which is better S&P or VNQ?
Best explanation of what an index fund actually is
Despite the fact that I have a fairly focused portfolio, occasionally adding a tiny new position can be beneficial. It isn't done to diversify. Focusing on something new is a useful diversion from obsessively overanalyzing what you currently have. It gives you and your portfolio some breathing room
What if you just copy what the index has and put $1 in every individual stock? No fee then 😉
MAKE MONEY WHILE YOU ARE SLEEPING!
As you slept last night, your rents are running. Your electric bill was running. Your data was running. None of your bills slept. They kept on billings as you were sleeping. In other words, you woke up owing more than you did before sleeping. That's why you need 'Passive Income'. So when you sleep, you can also make money, not just debts.
Early saving and investing money creates compounds growth, it's a beautiful thing.But it takes focus and discipline. You need to be focused enough to commit to a plan and a process. I’m a dividend investor, my wife and I have invested in the s&p500, both through my TSP with the government and through fidelity in her 401-k. Cashed out 370k from the S&P and invested with a full service broker.. Until about 3years ago we were 100% in the s&p after over 30 years. I’m retiring at the end of the month at 59, while my wife will retire next year at 54. We currently have 5.7 million in our tex deferred savings.
Awesome thank you so much you made that very easy to understand!
We work for years to have , $1million while some people I know put thousand of dollars in some meme coins and they are millionaires.
When it comes to investing, I’m so ignorant about it, I hereby ask; What’s your say or thought for anyone with over 100K $ looking for the best ways to make good returns off it? I will appreciate good ideas here.
On Robinhood the name is a little different and it says etf the same!?
I will forever be indebted to you you’ve changed my whole life I’ll continue to preach about your name for the world to hear you’ve saved me from a huge financial debt with just little investment thanks so much Mrs. Elizabeth Graham
get andrew tate on the iced coffee hour
I'll forever be thankful to you you've changed my whole life continue to preach about your name for the world to hear you've saved me from a huge financial debt with just little investment, thanks so much Mrs.Ivana Marich.