The 3 BEST Index Funds That Will Make You RICH!
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So if you ever wished there was an easy way to become rich that anyone could do with no prior experience. Well, guess what there is, and I’ve made millions doing it myself, but before you think this is some kind of scam, I’m not pumping the latest crypto coin or trying to sell you an online course that costs $997, I’m instead referring to index funds.
Index fund investing is super easy, incredibly effective, and in most cases actually ends up beating the profits of professional investors.
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A study published in 2020 showed over 15 year period, nearly 90% of actively managed investment funds failed to beat the market. Simply put experts who spend a full-time job, trying to beat the market are unable to beat most investors that use the index funds strategy.
So today let’s discuss what an index fund actually is, which ones are best for you and how you can use them to grow your wealth. The world has changed over the last couple of years, and now most people only seem interested in the stocks and crypto going to the moon, I get it.
It’s exciting to see your money multiplied quickly, but the harsh truth is lots of people who invest in more than I can afford to lose him risky investments. This means that when a crash happens and believe me, it always does, many people will be left with nothing. I’ve seen this happen time and time again.
And the people that make it through the storm are usually the ones that also invest for the long term. Of course, I’ve taken my fair share of risks over the years, like investing in a dot-com bubble and now by investing in the metaverse. However, the one thing I’ve kept consistent is my index fund invested. No matter of the market is up or down every week I prioritize those investments.
This is allowing me to grow my wealth over the long-term. When a lot of my previously richer friends have lost everything. So I like to think of index funds as my secret weapon, as they’ve meant that I’ve always had a backup for when the worst happens.
So it’s been a while since I’ve talked about index funds. So let’s break down what they actually are. Think of these Skittles as lots of different individual companies, this one is Tesla, this one is Apple, and this one is Coca-Cola.
Now as an investor, you could cherry pick the ones that you liked the most. This is called investing in individual stocks. However, these companies go bankrupt or crashing value you’re in trouble, mind you, I do like the new sour Skittles, they’re very tasty.
The great thing about index funds is with one simple purchase, you can own all the Skittles in the bowl without having to deal with all the hassle of creating your own hand selected portfolio, or have some expensive managers do it for you.
This is because they’re passively managed, which means they are extremely cost-effective. I have a large chunk of my wealth in index funds, and I dabble with individual stocks using my fund money.
This is because occasionally enjoyed excitement of CNN investments skyrocket 40% in a day, which let me tell you, it’s never gonna happen with an index fund, but that’s not a bad thing as it’s all about building long-term wealth and not short term wins.
The truth is that if a stock or crypto can give you these kinds of returns, then it could also swing back the other way. The great thing about index funds is if one company from within the bowl is having a bad time, like this one, boom, you’ve still got all the other companies holding it up.
An index fund, aims to track something called an index, which is a lot like a sports leaderboard. They can rank company size, location, business type, and even currencies. So because there are so many choices, let’s pretend we’re in a supermarket, and I’ll walk you through my 3.5 favorite baskets of stocks to invest in.
Remember I’m a businessman and not a financial advisor. These are just investments I believe in. And none of this should be taken as financial advice. I’m just aiming to make you aware of these investments. So please do your own research before investing. Basket number one is of course the S&P 500 Index.
This is the big daddy of index funds, and you’ve probably heard people talking about it before. I’ve certainly mentioned it hundreds of times, but there’s a good reason for this as it is such a great investment, and it’s done very well for me over the years.
On average, the S&P 500 has returned investors eight to 10% per year, which isn’t anything crazy compared to the latest, crazy like Shiba Inu, but it is pretty consistent, a much less volatile. That sounds great, but what’s inside the basket? Well, the S&P 500 is a top 500 American companies.
Well, actually it’s 505 stocks to be exact, in order to be included in the S&P 500, a company must meet certain requirements, include in achieving a specific market cap, having the majority of its shares in public hands, and being a public company for at least a year.
So if you buy one share of the S&P 500, you will actually own a small piece of Amazon, Tesla, Apple, PayPal, and so much more. The ultimate flex is telling your friends, you own all of these companies. One of the benefits of the S&P 500 is that it’s widely spread across many great companies in the USA.
To be honest, they are more like worldwide companies now, since the creation of the internet has a blurred the lines between borders made the world much, much more interconnected. The historical return of eight to 10% is allowing me to generate a fortune over the years due to the power of compound interest.
However, it’s worth pointing out that the S&P 500 is a bit tech heavy these days with five big tech stock dominating 23% of the entire fund.
It’s up to you if you see this as a positive or a negative, I personally don’t mind us tech is doing really well, and I do believe it’s the future, but there are so many different index funds.
So track the S&P 500, which one do I pick? Well, that depends on where you live in the world, and what investing platform you’re using. The best I found in the USA, the VFIAX index fund, or the VOO ETF, the best in the UK would probably be the VUSI ETF, but there are tons of other ETFs that also track the S&P 500.
One thing I look out for is that the dividends are reinvested into the fund. The only real difference between an index fund and an ETF, otherwise known as an exchange traded fund is that these can be purchased or sold at any time throughout the day, just like a stock, as long as the market is open of course, that’s why they’re exchange traded, it’s in the name.
Index funds can only be purchased in full once per day. So, for example, if the price of the fund is $500, you must pay $500. Whereas an ETF can also be purchased in fractional shares, which means you don’t have to buy a full share, and can instead invest whatever amount you like.
This is great if you’re just starting out, or you want a dollar cost averaging, I do this by making a stand in order each week. And I don’t even know it’s come from my bank account, really and truly there isn’t a huge difference between an index fund and an ETF. So just consider which one is best for you and take the plunge.
Basket number two is a total stock market index. The total stock market index is, well, the definition of diversification, you can’t really get any more skin in the game for a lower cost than this.
So if you want to invest for a long period of time without having to check or even think about it, then this is most likely to fund for you.
Investing in everything means you can experience gains across the entire market. And unless a crazy crash happens, you should be okay. But even if it does crash, with time things bounce back.
I’ve seen three crashes since I’ve been an investor, the dot-com bubble, the 2008 financial crisis and the 2020 COVID crash. I’m not gonna pretend these crashes didn’t hurt, but long-term, every market I’ve invested in has bounced back.
But downside to this index is that it depends on the entire market trending upwards. This means that there could be an individual stock that you really believe in that goes all the way to the moon, but you might not experience those gains because that one stock doesn’t play much of a role within the index fund.
If you’re an active investor who likes to try to mess with options, this index fund is probably great to have as a safety net that you regularly invest into.
The best I’ve found in the USA is the VTSAX index fund, and the VTI ETF and the best in the UK is the VWRL ETF. These are Vanguard index funds, but you should be able to buy them on most platforms, including public and free trade.
The third basket is the emerging markets index. Emerging markets are predicted by some experts to be on the rise. And whether I agree with this or not, I think it’s important to have at least a little bit of exposure to these markets.
It’s all well, good buying the S&P 500, but when China or another emerging country has some great gains, you’ll end up missing out. I’m definitely more excited about funds like the S&P 500, but as I also do a lot of business in China, I see firsthand why invest in emerging markets is a good idea.
Just as an example of this growth. When I first traveled to China, I looked into buying an apartment in Shen Zen. This real estate was $47,000, and is now worth over a million.
This just shows the potential growth in these markets. Emerging market funds are definitely the most risky type of index fund we’ve discussed so far.
These funds include stocks from lots of different growing markets and can be very heavy with Chinese companies, taking a look at the list of the largest economies in the world, a lot of them are emerging markets.
So it just makes sense to me to throw a little bit of money in for diversification. Also, the population of these emerging markets is absolutely huge.
So I think there’s certainly potential for growth, not only in their own countries, but in exports as well. As I said before, these are definitely more risky plays, but countries are adapting and evolving.
So I do like to invest in their future. The best I’ve found in the USA is a VEIEX. That’s a mouthful ETF, and in the UK, the VFEM ETF. They don’t make it any easier there, do they?
The next is a bit of a bonus one as it’s the metaverse index. This has just made me even more confident that the potential profit is insane.
And therefore, it’s not something that I can ignore, because of this, I’ve been investing more and more into companies that I think will be heavily involved in the metaverse.
And I’m not just talking about META. I’ve just been picking my favorite stocks and building my own portfolio, but Roundhill Investments are offering a META ETF. This makes things easier as it offers exposure to lots of companies that are set to benefit, and take part in the metaverse all with one simple bite.
But of course the metaverse isn’t here yet. And it’s all just speculation at the moment. Also the top 10 companies in this ETF are not all selections I would make.
So that’s definitely something to look out for and consider, this ETF also has quite a high expense ratio of 0.75%, which may not sound a lot, but trust me, it’s considerably more than a lot of the funds I’ve already talked about.
I think the best way forward is to look at what stocks the META ETF holds, and then buy the ones you like individually. But if this sounds like too much hassle, then ETF is definitely something to consider.
When I first heard about index funds, I thought it was fantastic. ’Cause before I’d always thought investing was only for the rich, the most important thing is getting started.
And index funds gave me the ability to start investing when I knew very little, which meant that I could get the snowball rolling. So if you’re sitting on the fence, then now is as good a time as ever to start your long-term investing journey.
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