| |
Index investing - Going by the numbers
By Jakob Jelling
The Dow, the NASDAQ, the S&P 500 – these are stock indexes, company structures that keep track of the values of listed stocks and enable brokers and others to trade in them. Index investing involves holding a portfolio of stocks or a mutual fund spread across an index, so that the value of the stocks is relatively equivalent to the value of the index at any given time.
The three big funds aren’t the only indexes available for investing; there are thousands of others, including not only American-based indexes but indexes specific to other countries and international indexes. When looking at index investing, you should keep in mind the wide variety of possibilities for your invested cash.
The most significant advantage to index investing is that it’s easy to diversify your investments, reducing your risk for losing money. Index funds also have a lower expense ratio than other types of mutual funds, which ensures that you’ll be able to keep more of your money.
Although index investing seems to be hard to target to your areas of interest, it’s actually easier than you think. For instance, if your interest is in tech stocks, your index investing choice is a NASDAQ fund. If you believe that a market in another country, say India or South Korea, is getting ready to take off, then you invest in a fund from an index based in that country. You have more choice than you might think.
Choosing Your Index Investing Fund
You should educate yourself about the different indexes available before you choose a specific fund. If you’re interested in blue chip stocks, you should invest in a fund based on the Dow Jones Industrial Average; this index tracks thirty crucial companies heavy in blue chips. If you want a more diversified portfolio that is based on a realistic picture of the American stock market, you should look for a fund based on the S&P 500.
If you’ve been looking overseas at the advances made there, you should look for an index investing fund based in a promising foreign economy. South Korea is emerging as a world leader in health technology, for instance, as well as a prime area for outsourcing by American companies.
As in any mutual fund, you should look to the long term rather than the short. Index investing funds may be volatile in the short term, but historically they’ve always gone up. Some analysts are predicting a tripling of stock value by 2020, in fact; this may be overly optimistic, but long term gains will be offset if you overcompensate for losses and sell your holdings early. Experts generally recommend that you leave your mutual funds and index investing funds alone most of the time, making adjustments on an annual or semiannual basis.
About the Author
Jakob Jelling is the founder of http://www.cashbazar.com. Please visit his financial website to learn more about investing.
Article Source: http://www.simplysearch4it.com/article/3758.html
| If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/3758.html" as shown above and make it hyperlinked. |
| Some other articles by Jakob Jelling | Mixing and pouring concrete
Mixing and pouring concrete often sounds easier than it is. This task implies handling the right amount of ingredients and handling them at the right moment and the right way, and all these aspects might ...
How to repair cracked vinyl siding
Although vinyl siding has many advantages over wood and does not wear as easily, sometimes it can be cracked and might have to be replaced. Extreme weather conditions, such as strong ...
How to install replacement windows
Replacement windows can be a great choice when needing new windows and wishing to be able to replace them easily. Replacement windows are created and designed in ...
How to install an under-the-sink water filter
Installing a water filter can be very important, especially in those cases where water has more chlorine or minerals than we might wish, or when we simply ...
How to install a ceiling fan
A ceiling fan can be a great choice for acclimatizing an environment, especially when the space is reduced, but installing it can be difficult and tricky. If you have a ceiling fan that brings ...
How to replace a windowsill
Replacing a windowsill can be easier than it seems, you might only need to count with the necessary tools and follow several steps. We ...
|
|
| |
|
|
|
