Hola bellas! You’re feeling inspired to start investing but you’re trying to figure out your best investment options. How do you hit the piñata and get the most out of it?
So, what is an index fund? An index fund is a type of mutual fund that is made up of stocks, bonds, or securities of a particular market index. For example, you can buy an index fund that tracks the S&P 500, an index of the performance of the largest 500 public companies in the United States. Since index funds are made up of stocks of every single company listed on a particular index, they mimic the performance of the index altogether, which makes it extremely diversified.
Examples of other indexes include the Nasdaq (tracks more than 3,000 technology-related companies), the Dow Jones Industrial Average (tracks the 30 largest firms in the U.S.), and the Wilshire 5000 Total Market Index (tracks the nearly 7,000 publicly traded U.S. companies).
Unlike buying individual stocks, if one of the companies’ performance goes down, it will not have a noticeable negative impact on your returns, because your index fund is made up of many companies. Another benefit is that since, as a whole, the stock market has risen in value over time, the index fund will also rise in value with the index. Another plus is that since they don’t require a professional broker to actively manage it, they usually have lower fees.
It is a great investment option if you’re looking to pay low fees and have a diversified investment that does not take up your time to monitor. Listas? If you want to start investing quickly in index funds, you can buy the index fund online through a broker or a mutual fund company.
Here are a few of the brokers you can buy index funds from:
Ameritrade
Merrill
ETrade
Vanguard
Fidelity
Before you invest your hard-earned dinero, make sure to look at the minimum dollar amount listed to start investing and also the percentage that will be deducted from your returns (expense ratio), which is one of the main costs associated with the index fund. Usually, the expense ratio is low, at less than .10%. The costs will usually be lower than other investments, but it’s good to compare the costs when looking at different brokers because some brokers charge higher fees. Just make sure you look at those details before you buy, and you’ll be good to go! Who said investing wasn’t easy?