Get Rich, Build Wealth, Go Index!
June 6th, 2008 | by Naimp | Posted in Finance |Investors know that the best way to get rich and build wealth is to put your money in a diversified stock portfolio and regularly invest for the long haul so you can take advantage of compound interest (what Albert Einstein referred to as “one of the greatest wonders of the world).
But with so many mutual fund options, where do you start? How do you go about choosing the right mutual fund that will make you the most money?
The answer is very simple, and that is to keep it simple. Consider investing in an index fund.
Over 80% of mutual funds do not beat the market, so why bother? They will just cost you more money in fees and they will not make you as much money. Investing in an S&P 500 index fund, however, will keep you costs very low and will guarantee that your investment will track the results of the U.S. stock market as a whole.
And if you have faith that the American economy will continue to prosper, which history indicates you should, you are guaranteed to earn an about 10% returns over the course of the long run.
Study upon study has proven that is very difficult and unlikely that a stock trader will beat the market. So why resist and take those chances? Go with what will guarantee you results and make you wealthier and invest in a plain, old index fund. That way you don’t have to worry about actively managing a portfolio or being a stock market expert. Just regularly invest your money in the fund and relax while you enjoy the greater things in life.
If you are the risk taker that wants to go against the grain and try to beat the market, go for it. Just be smart about it by using 10% or less of your total capital for your pleasure. That will allow you to keep your money working for you in an index fund, while giving you the option to have a little fun and speculate without the risk.
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