Index Fund is an most popular investment. But some people ask me, Why Index Fund is considered a good investment?, and Is Index Fund a good investment in reality?.
Warren Buffett sir has also recommended to the people to invest in Index Fund. Because It has many best features to give a good return on investment. However, In this article we will see, the good features and Is Index Fund a good investment or not.
An Index Fund is a kind of Mutual Fund. It is the same as the Mutual fund with a portfolio constructed to Follow or track the elements of the Financial market.
An Index Fund is a group of Stocks or Bonds with the best performance. It represents the overall performance of the Financial market.
An Index Fund is like a Passively Managed mutual fund, therefore the Fees charged (also referred to as Expense Ratio) by these Funds are low compared to the normal Mutual Funds. And most of the time a mutual fund will rise or fall the maximum amount because the Index it’s imitating.
Investing through an Index Fund may be an excellent and safe way of diversifying your portfolio as most of the benchmark indices contain big and established companies. And it’s also loved by retail or Small investors who don’t want to burn their hand while investing within the stock exchange.
The Index Fund contains the best company in their country and the retail Investors also want to invest their money in the best company in their country. The aim of both sides is the same. So, the retail investor likes to invest in Index Funds.
Warren Buffett thought about Index Fund
Warren Buffett is an most popular investor amongest the people. They think, Index fund are the best way for everyone to grow their money by investing in it.
“Don’t invest which left after spending, Also spend which left after Investing”Warren Buffett
Warren Buffett believes, Investing in an Index fund is much better than selecting a single stock for investment for the long term. So, If you want to invest in the long term then you can go with the Index Fund.
The important truth of Warren Buffett is that they invest in Index Fund now also after becoming the best investor.
First of all, he advocated buying a “broad index” such as the S&P 500. However, he also said that buying in increments is probably the best option for investors. “I would take the S&P 500, as long as I wasn’t putting all my money in at one time,” he told the audience in 2002.
On this point, Buffett went on to add:
“So I would pick a broad index, but I wouldn’t toss a chunk in at any one time. I would do it over a period of time because the very nature of index funds is that you are saying, I think America’s business is going to do well over a — reasonably well — over a long period of time, but I don’t know enough to pick the winners and I don’t know enough to pick the winning times.”said by Warren Buffett
And lastly, Buffett warned investors to consider the cost of investing with certain funds before making any decisions. He said:
“If I were going to put money into an index fund in relatively equal amounts over a 20 or 30-year period, I would pick a fund — and I know Vanguard has very low costs. I’m sure there are a whole bunch of others that do. I just haven’t looked at the field. But I would be very careful about the costs involved because all they’re doing for you is buying that index. I think that the people who buy those index funds, on average, will get better results than the people that buy funds that have higher costs attached to them because it’s just a matter of math.”said by Warren Buffett
Warren Buffett also known as “Index Fund promoter”. what do you think about the thought of warren Buffett? let me know in the comment box below.
Related article:- ETF vs Index Fund, Which option is better for you?
Why Index Fund is considered a good investment?
Basically Index fund is a good investment for the people such as engineers, doctors, shopkeepers, and many more who don’t get time to check the portfolio. I personally recommend this type of people to invest in Index Fund if you want to invest in the stock market.
The Index Fund is best option for those people who want to invest in stock market and bonds and they want have knowledge about it and then also they want to invest in it.
Let’s see, what happen to invest in stock market without knowledge?
According to me, Investing in the share market without knowledge is the same as gambling. As we lose our money in gambling at the end. It same happens with the people who don’t have knowledge about the stock market and want to invest in single stocks.
So, It is better to gain knowledge and then invest in single stocks and the other option is to select the Index Fund for investment. That’s the reason, Index Fund is considered a good investment.
Is the Index Fund a good investment?
The Index fund is a medium risk, high return investment. The people are asking “Investing in Index Fund is a good idea”. Let’s see, who should invest in Index Fund.
If you are new to the stock market, my advice is to start investing in Index Fund. It will help you to get knowledge about the stock market. Let’s know, What will happen if invest in Index Fund.
Investing in Index Fund can reduce risk. Because investing directly in the stock market can be risky for beginners and on other hand, you will get the knowledge of the stock market.
So, If you are beginner in the stock market. Then start with investing in Index Fund. However, Index Fund is a good investment for everyone.