Is Investing in Index Funds a Good Place to Start?
Find out if investing in Index Funds is a good place for you to start and what steps you should follow to get there.
Published April 22, 2021.
Index funds are a low-cost, no-fuss way to invest. It might be the smartest and easiest investment you'll ever make. If you are a newbie, this is the most simple way to start your investing career. I highly recommend investing in them.
Index funds are passively managed, which means they typically hold what's in the index to maximize returns and minimize costs.
So what do I like about them? I just enjoy their dependable performance, inexpensiveness, and simple diversification. The only bad thing is that they lack flexibility, meaning when some stocks are underperforming, the fund manager can’t sell them.
A couple of simple steps to follow:
- Decide what location-based funds you want to invest in, domestic or foreign?
- Look for an industry you trust
- Calculate the expense ratio
- Check the tax-efficiency
- Make sure you have the investment minimum
- It’s time for the purchase
You can purchase an index fund directly from a mutual fund company or a brokerage, you can also look for commission-free options.
Investing in index mutual funds and ETFs can be an excellent low-cost strategy for all or a part of your investment portfolio. Like any other investment strategy, investing in index funds requires that you understand what you are investing in.