The basics of index investing.



Chapters:

0:00 Introduction
01:09 What is an index fund?
02:25 Advantages of index funds
05:13 Choosing the right index fund
08:40 Get a brokerage account
10:14 How to buy index funds



If you would like to support my channel!: [ Ссылка ]

Mint Mobile (save on your cell phone): [ Ссылка ]

Books on Index Funds

The Simple Path To Wealth: [ Ссылка ]
Your Money Or Your Life: [ Ссылка ]


The stock market scares many people away from investing; however, once you start to get to know the stock market, it is not as intimidating as it seems. In this video, I explain a simple, passive form of investing in five steps called, "Index Investing."

Step 1: What Is An Index Fund?

To understand index funds, it is first helpful to understand what a stock is. A stock represents one single company (like Apple) and the price of the stock will be dependent on that single company's performance.

An index fund, however, is a fund that consists of a group of stocks that tracks a market index (like the SP500). Instead of buying one individual company, an index fund is a basket of multiple companies under one ticker symbol.

Step 2: Advantages Of Index Investing

There are many advantages of buying index funds over stocks and in this video I mention three.

1. Lower Risk Investment: Compared to a stock, an index fund (that tracks the SP500) is composed of over 500 different companies. Some companies will do good, while others won't, but the price isn't determined by one company. This lowers the risk as the risk is spread out between 500 companies.

2. Long Term Growth Potential: The market returns an average of 10% a year; however, this is an average over time. Some years will do better while others will do worse. In the long term, the market has always gone up, so there is growth potential in the long term.

3. Passive Form Of Investing: After buying index funds, there is no more work needed on you. All you have to do is buy, hold (and don't sell), and the market will do it's thing. It is completely passive.

Step 3: Choosing The Right Index Fund

There are many things to consider with choosing an index fund and I mention 4 things.

1. Minimum Investment: Depending on how much money you want to invest, some index funds have a minimum amount required. This can determine which invest funds you can invest with.

2. Expense Ratio: The expense ratio is how much money you spend each year for the index fund. Many index funds have an expense ratio under .05%. It is good to keep this as low as possible.

3. Transaction Fees: Transaction fees often occur when you buy an index fund from an outside broker (for example, a Vanguard index fund with the broker Schwab). These can be very high, so to avoid them it is best to choose the same broker as the index fund.

4. Price Per Share: Just to avoid confusion, price per share (the dollar amount of the fund) has no relevance as it is all percentage based. You are not getting a better deal if one index fund costs less than another.

Step 4: Get A Brokerage Account

Once you have researched which index fund you want, in order to buy it you need to open up a brokerage account. The biggest brokers are Charles Schwab, Vanguard, and Fidelity. You simply open an account on their website. They will be where you can purchase index funds.

Step 5: How To Buy Index Funds

Finally, once you have a brokerage account you can now purchase an index fund through your broker. Every interface works differently; however, your broker can provide you with the guidance on how to do it.

It is important to note that index funds, usually, trade once a day once the market closes (compared to stocks that trade every second). Once the market closes, you will get that price for the index fund.


**I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make. Links above are affiliate links where if you click and order, I will receive a commission at no cost to you. **

свернуть