Four Advantages of Index Investing

The best time to save for rainy days is today. Problems can arise in life without any prior notification. Hence, saving money should be the priority. Investing money is crucial for all and sundry. Today, an increasing number of people are investing money in stock market these days. If you are also thinking of making an investment and wondering which way to get started, and then index investing makes for an ideal option.

Index funds allow investors to own baskets of bonds, stocks as well as other securities that can track benchmarks which are known as “indexes”, thus offering investors an effective way of participating in the markets. There is no denying the fact that most investors are attracted towards index investing due to the diversification such funds provide, their low costs and their tendency to be tax efficient.

When it comes to making investment in the stock market, the most difficult and tough part is to decide the stock in which investments can be done.  Those who have been investing in the stock market might be well aware that there are thousands of listed companies in which you can invest your hard earned money. Make sure that you do your research and homework before making any decision. And easiest way to make investment in diversified portfolio of stocks is to invest money in index funds. Listed below are a few advantages of investing money in index funds.

What is an index funds?

An index fund refers to a mutual fund that attempts to match the performance of a major market index.  For instance, the Dow Jones Industrial Average.The way in which it does this is by investing in the precise same companies as the average that too at the same proportions. It is the best mirror for index funds. In this way, if the average goes down, the funds go down too. And, if the index rallies, so does the fund. Thus, what are the advantages of index investment?

Outperform more than 80 percent of actively managed funds

Is it that average doesn’t sound good? Well, in the case, if you invest your money into actively managed funds then there are more than 80 percent chances you might end up with less money in return. As a matter of fact, they cannot beat an index funds mostly. If you choose to invest money in an index funds then there is a four in five chance that you’ll do much better than investing money somewhere else.

Low maintenance

When you decide to save and invest for retirement, you just want to set and forget investment done. You want to invest your money and achieve the market average and in next 20 to 30 years you will have huge amount of money for your retirement. This is exactly what these funds allow you to do.  So, choose an index fund wisely and do not waste your money and time.

Assured average returns

Most of the investors aim to get above average returns while investing money, however fail to do so. As a matter of fact, they fail to even achieve average returns. It is apparent to achieve the market average at least. You can be assured of the market average by making investment in index funds. Given that the index fund is the average, the moment you make an investment, you know you have achieved the average.

Low cost

One of the primary reasons why actively managed funds under-perform index funds is that they are pretty expensive to run. They have to employ traders, fund managers and analysts and other experts who can give you perceived value.  Such funds simply follow the average thus they spend very little money. This pretty visible from the return you get.

If you are looking for information or advice on index investing then visit Cartias Advisors, a one-stop destination for those who want to invest money in the market.