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Investing in Index Funds

A Beginner's Guide



With a world full of choices, it can be tough to figure out what do with our money. Most of the time when we are thinking about the future we are left wondering, “Wow, what if I reach my financial goals and retire early.” But then reality hits, and it can seem nearly impossible to reach your financial goals but if there’s a will there’s a way!

Some piece of advice we can give you today is that, a great way to start is to invest by putting your money into index funds. You might be wondering how that sounds any simpler than investing in individual stocks or even what is an index fund. No worries we are here to help and here’s a little preview- you get the advantage of greater diversity through multiple companies.

No, this doesn’t mean we are giving you the secret recipe to avoid all the patience it takes when you are investing large amounts of money over years. We are here to show you what index funds are and simple steps on how to start. It may sound simple but remember don’t go through this journey lightly!


Before we dive in, here's an infographic to see the differences:


I have to say most people know about stocks or have heard of it before and are always curious about which stocks they will get the most out of. On the other hand, many people aren’t aware of investments like mutual funds or exchange-trade funds (ETFs). This is some great news because instead of finding individual stocks, investing in index funds make it possible for investors to spread their investments across many companies.


This is amazing! That means the risks of losing money are lower, and you can feel confident there will always be a back-up if another one falls through.


Guess what else is awesome about index funds? Since there are so many of them, they are really cost-effective, and it’s possible to trade with these funds online for FREE. Who doesn’t love free things?!


Here some steps to get these index funds going:


1) Pick a Platform

➔ This is where you pick what companies you want to invest in. Some basic questions you should ask yourself during this step are:

  • Does this fit your budget?

  • Can you access these funds?

  • Is it easy to navigate the provider’s website or apps?


2) Create your account with the provider

➔ Make sure the provider is legit because this is where you will be filling out some sensitive information about yourself.


3) Connect your bank account

➔ This step can’t be missed! You’re doing all of this for a profit so make sure you link your new investment to your bank account.


4) Select Investments

➔ Now that you checked off the other steps, you need to pick an index fund to invest in. Look for a diversity of funds and low-costs.


Conclusion


You know what?! Investing in index funds doesn’t sound so bad after all! Being able to have a broad diversification from being connected to so many different companies is exciting. There could be times when the energy market is going down but at the same time it may cause utilities to go up in the market. Who knows?! It is unpredictable what competitors will do next or what will happen in the world, so it is best not to put all your eggs in one basket! Raise your hand if index funds sound like a good idea to you!

Resources


 

Do you have an idea for a blog post you'd like to share? Perhaps there's a new development we can talk about, or a tax area you're curious about? Email the marketing coordinator at Samantha@PracticalAccountingVA.com Questions? Follow Us: @PracticalAccountingSolutions on Instagram @PASFredericksbrg on Twitter @PracticalAccountingSolutions on Facebook Practical Accounting Solutions on LinkedIn If you have questions about this blog post or have suggestions for a future post, contact us today! Disclaimer: The views presented in this post are meant as educational resources and should not be taken as direct advice for your personal finances or small business. Should you have questions regarding a post relating to your specific finances, please contact us at info@practicalaccountingva.com.

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