Is Investing in Index Funds a Good Place to Start?

Index funds are a low-cost, no-fuss way to invest. It might be the smartest and easiest investment you'll ever make. If you are a newbie, this is the most simple way to start your investing career. I highly recommend investing in them.

Index funds are passively managed, which means they typically hold what's in the index to maximize returns and minimize costs.

So what do I like about them? I just enjoy their dependable performance, inexpensiveness, and simple diversification. The only bad thing is that they lack flexibility, meaning when some stocks are underperforming, the fund manager can’t sell them.

A couple of simple steps to follow:

1. Decide what location-based funds you want to invest in, domestic or foreign?
2. Look for an industry you trust
3. Calculate the expense ratio
4. Check the tax-efficiency
5. Make sure you have the investment minimum
6. It’s time for the purchase

You can purchase an index fund directly from a mutual fund company or a brokerage, you can also look for commission-free options.

Investing in index mutual funds and ETFs can be an excellent low-cost strategy for all or a part of your investment portfolio. Like any other investment strategy, investing in index funds requires that you understand what you are investing in.