Index investing is a passive investment strategy that attempts to generate returns similar to a broad market ‘index’ such as the S&P 500, which is simply the 500 biggest companies in America put into one big group.
In this example, investing in one ‘share’ of the S&P 500 index fund would be the same as buying a small portion in each of these 500 individual companies. The size of the ‘portion’ that each business makes up is determined by the size of the company. For example, Microsoft, Apple, Amazon and Facebook make up over 10% of each ‘share.’
There are several advantages of index investing. For one thing, research finds index investing tends to outperform active management over a long time frame. Taking a hands off approach to investing is an ideal investment strategy for those of us whom A) Don’t have the time to sift through various companies financial reports, B) Don’t want to sift through various companies financial reports due to lack of either interest or knowledge. These two groups are our target audience. These two groups are also most likely to fall victim to the notion that pension funds will provide a satisfactory return on your original investment, or to become enticed by the empty promises of active hedge fund managers/companies who need to return usually 5% just to have you break even after their fees.
TO BE COMPLETED…….
Invest And Succeed 