Compare online brokerage firms to check for functionality and fees. Consider ETFs in addition to index funds.
Contribute regularly over time, which will allow your funds to grow and compound on themselves over and over again.
Total Stock Market (ETF) – VTI
What is an Index Fund? Simply put, an index fund is a type of mutual fund with a portfolio that aims to match or track the components of a market index. The advantages of index funds are broad and varied, but they include the fact these funds typically offer low fees, low operating expenses, and broad market exposure.
According to our resident financial advisor Matt Becker, index funds offer investors an almost ideal strategy to earn maximum returns over the years.
Index funds take the guess work out of where to invest your money by socking your cash into a broad range of low-cost investments on your behalf. But, the biggest advantage that comes with investing in index funds really boils down to cost, says Becker. That simplicity keeps costs low, and those low costs are passed on to you in the form of higher returns.
So, how did I get started? Basically, I just went to Vanguard and opened an account. They ask for information on your checking account when you create the new Vanguard account. From there, you can manage everything electronically. As a result, I found myself saving my nickels and dimes until I could afford that initial buy-in.
Vanguard S&P 500 Mutual Fund
The tools that Vanguard provides allow you to make automatic investments in about any way you could imagine — rolling your dividends back into the fund, automatically investing each week or month from your checking account, and so on.
Obviously, you can buy into as many funds as you wish from this one account, each with their own automatic investment plans set up however you like. Why go this route? The fees for investing directly are quite low — 0.
If you want to set up a regular investment plan, doing it directly through your brokerage is the way to go. The process for investing this way is very similar — you can sign up onlineprovide checking account information, and start buying. In this situation, one approach is to buy an ETF exchange-traded fund.
ETFs are like stocks that represent a specific set of additional stocks, much like a mutual fund. You can buy and sell them just like any other stock, but their value is pegged to the value of the included stocks. The fees charged for these are usually lower than the same exact index fund would be — for example, the Vanguard VFINX index fund has a 0.