You are welcome to another episode of investment talks !
Investing and making money in stocks\shares is a complex task for the experts, not to mention inexperienced traders. Many people have now resorted to investing in mutual funds or trusts. But today, we would like to tell you more about the index tracker and why you should consider it an investment tool.
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Are you part of the over 50 percent of people that do not know what index tracker means?
Unfortunately, people are not aware of this investment tool and its meaning. If you watch this channel, you will have an idea of several investment tools. And you will agree that the index funds are the ABC of safe and guaranteed returns for your investment.
The Idea of an index tracker fund is not as popular as other investment tools like stock and forex trading.
A good example is the S&P 500 Index. This S&P 500 cumulates the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. Many funds design their portfolio duplicating the index and track these companies’ performance. Imagine owning shares in over 500 companies.
Now, what makes Index Tracker funds different from other investment tools, and why should you consider the tool?
Let’s look at three critical reasons why I recommend the index tracker any day:
You enjoy diversification of your investment portfolio
Like the famous saying, “don’t put your eggs in one basket”, you can avoid placing your investment in one place with the index tracker fund. Since your funds are spread over various investment portfolios, you enjoy the benefits of diversification of funds.
While investing in shares allows you to share in the profit of the company, so also you may suffer loss when the shares go south. You can never predict the market, but with diversification, you may not directly be affected by the fluctuation of one company.
2. Investing in index Tracker fund is affordable
You might be concerned about the minimum amount of capital needed to invest in an index tracker fund. Well, it is affordable to invest in the index tracker fund, you will not be buying shares in all the companies but instead buying into the index tracker fund, which takes care of the distribution of your funds.
Also, the maintenance charge is usually low, with an index fund ranging from 0.05 to 0.07% of your investment. The funds are passively managed, so it takes less to service this investment. In most investment portfolios, maintenance fees, turnover ratio, and other expenses are high because they are actively managed. Still, the overall charges are generally minimal with the index tracker funds..
You do not have to feel overcharged with unexplainable charges because they are minimal.
Expect attractive returns
Investors have always gained in the long run when you look at the returns of index tracker funds over the years. An excellent example of an index tracker fund that has outperformed is the S&P 500, which has continued to earn attractive returns for investors over the years. When you have such records at your disposal, you will be confident to invest, and that is one of the reasons the index fund investors are increasing their investment after their first installments. There is high investor confidence because of the regular attractive returns benefits.
Why wouldn’t you want to invest in a fund that will guarantee results in the long run?
However, I will not advise you to jump into the next index fund you see. As I always recommend, do your research and consult with an expert before investing in any instrument. You can search for reviews about these investment tools online and learn how they have been performing from other investors. Also, they have their records available to the public to check out their track records over the years. Talk to the representatives and other experts for their professional perspectives.
To invest in an index fund tracker, you will have to follow the steps below to invest in an index tracker:
- The initial step is to pick an index to invest in. Different fund managers manage several index funds. You can do your research to determine which one will suit you. Also, visit your financial adviser to find out about the best index and find the one that suits you. Some popular index funds in the US include S&P 500, Dow Jones Industrial Average, Nasdaq Composite.
- The second step is to select your index fund to track the index. If the index funds have more than one way to fund, you will find the one that suits your budget and has the features you will need.
- Then you will have to purchase the index fund shares. Find a suitable brokerage or trading platform and buy shares of the index fund. It is best you research various trading platforms and find the one that you will find suitable for you. Different platforms have different packages and benefits, and you should find one that will make it easy for you to invest.
I hope you’ve learned lots more about the index fund. It was a great session we had today. I would like you to share this video and help others who need it and to see similar topics such as “the benefits of regular investment”, “what are the best businesses to start with little money” and “My ideas for long term investing in December”. Also, don’t fail to subscribe to the channel and get the latest video update.
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Thank you all for reading, and until next time:
Stay green and motivated!
Recommended books for further reading:
- Think and Grow Rich
- Keys to Success – Napoleon Hill
- The 7 Habits of Highly Effective People – Stephen R. Covey
- Secrets of the Millionaire Mind
- The Richest Man in Babylon