How to start investing in low cost index funds
Previously we outlined how to begin investing with 5 actionable steps. Begin with this article if you do not currently have an investing account. After reading that article and setting up an account, then you may proceed to the information below.
After choosing the type of account that you would like to transfer your savings into, you have some options once the money arrives for what you would like to invest in. You could try to pick individual stocks and become the next Warren Buffet, but I strongly encourage you to avoid this temptation. Rather, I like to keep 90% of my money exposed to a broad array of stocks which typically earn 8-10% per year over the last 200 plus years. How do I do this? Low cost index fund investing.
The choice is yours. Consult a financial advisor immediately if you are not willing to embark on this journey alone and accept the full responsibility of managing your own money. For those so inclined, managing your own money has the ability to yield superior results, if you are willing to become an expert in personal finance along the way (yet another reason to start reading).
My favorite companies to open investing accounts with are Vanguard and Fidelity. They offer some of the lowest cost index funds that give you the opportunity to participate in years and years of compound interest, without all the added fees that active mutual funds typically carry.
Be advised, not all companies will offer top notch low cost index funds. Often times, especially in 401(k) and 403(b) plans, your options will be very limited. I believe that you can still find good low cost options that expose you to a broad array of stock ownership by following some simple tips outlined below.
How To Find Good Index Funds Regardless of What Company Your Investment Account Is With
When considering index fund investing, here is primarily what you are looking for:
I started this blog because friends and family often asked me similar questions regarding personal finance. I was surprised just how much people were interested in improving their financial situation, yet had no idea where to start. It made perfect sense to start a blog and share all the information that I have learned along the way with others. You will find many resources and links referred throughout the blog. I have found all of this information useful and continue to grow my knowledge and understanding in the personal finance space. Admittedly, even I struggled heavily in the beginning with understanding how to improve my financial situation. The power of reading and note taking got me where I am today and will continue to provide a return on investment for years to come. I look forward to sharing with you along the way.