*Disclaimer*
Before I begin, I want to remind you that I'm not an investment advisor, investment consultant or any kind of investment professional. I'm an average person that has learned about investing through trial and error, read countless books, took courses and applied my education to my personal finances. I prefer to DIY my investments and have control of my money. If you don´t feel confident to DIY your investments, seek professional investment advice if you need more information and assistance! Luckily, the websites I mention have brokers, traders and professionals ready to help you! Do your due diligence and research them to make sure they are working in YOUR favor and not theirs.
Index Funds are similar to a High Yield Savings Account but they come with risk. They are an average risk investment option and they have passive income benefits (Ex: Share prices, and Dividends: a reward paid to the shareholders for their investment in a company's equity. This reward usually comes from the company's net profits.). I will just describe the passive income benefits here.
In the future, I’ll give a brief introduction about stocks and Investments. Index Funds are a group of funds (Mutual Funds or Exchange Traded Funds/ETFs) that hold shares in a variety of sectors. These are considered an efficient (sometimes called ¨safer¨) investment option because you’re investing in a piece of EVERYTHING at 1 price. So, if the medical sector has a bad year but the technology sector has a great year, you lose some money from medical but gain money in technology. It´s self-cleaning and balances itself out. To see the maximum benefits (i.e. Your Return on Investment - R.O.I.), it’s advised to invest for 10-20 years. It might look bad at the beginning but you need to wait at least 1 year to see that you’ve actually gained. I only advise investing into these kinds of funds and stocks if you have money to spare. If you don’t have enough money to eat or pay the rent, I don’t advise investing in anything! Your survival comes first!
Fidelity Investments is one of my favorites. I can invest, manage my IRA and save all in one place. Fidelity also has their own index funds that are commission free (meaning, you don’t need to pay a broker fee to buy them! Yay!). A few Fidelity Index fund names: Fidelity® 500 Index Fund (FXAIX), Fidelity® ZERO Total Market Index Fund (FZROX), Fidelity® Large Cap Growth Index Fund (FSPGX). Some Vanguard Equivalents to compare: Vanguard 500 Index Fund (VOO), Vanguard Total Stock Market Index Fund (VTI), Vanguard Total Stock Market Index Fund, Admiral Shares (VTSAX). There are many more. Try to compare expense ratios (i.e. management percentage fee you will pay) and the annual percentage yield (YTD, the average percentage amount you can expect to earn) to give you some guidance on which stock you should choose.
Remember, the past is just a guide and won´t predict the future! NOBODY can predict the stock future!! You can only make an educated guess. Comparing different funds histories can help you make that educated guess. Here is a screenshot I took from February 6, 2024 of Fidelity (FZROX) and Vanguard (VTSAX) Total Market Index funds. Both of these funds have approx. 1,298 shares of the entire market (i.e. A little bit of everything). View it and study to understand. You will notice that Fidelity´s fund is newer than Vanguard´s but they are both rising and falling (yet, consistently rising), equally.
Here are other options to name a few:
If you have Netflix, I highly recommend watching the docu-series ‘Get Smart with Money!’ In this series, 4 Financial Coaches help different people with different income statuses save and manage their money. You can also check out I Will Teach you to be Rich, Ramit Sehti on his Netflix show, How to Get Rich. His show, YouTube channel and book revolve around the theme of asking you, ¨What does your rich life look like?¨ He gives you a step-by-step guide to improve your financial life.
📢Need financial advice? Contact me for a 1-on-1 financial coaching session!
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