In Peter G. Bielagus’s book, “Getting Loaded,” he provides a variety of tips for young inverstors. His biggest tip for building financial wealth is to invest in the stock market at an early age. Historically, he says, the stock market has outperformed all other types of investing. Investing is not easy and with a variety of different ways to invest, it can be quite complicated.
If you want to be an intelligent investor, you need to spend a lot of time deciding and choosing the best investments. However, the point of investing is so that you can live the life you want to lead and many people do not want to spend the time and research that it takes to invest wisely and so, Bielagus recommends that as a young investor, you purchase index funds.
An index fund is a way to buy every stock on the market. Index funds are great, Bielagus says, because you don’t need to spend hours and hours researching where to invest your money, chances are you will beat the professionals and you will pay lower commission percentages.
Obviously, by choosing an index fund and buying every stock in the market, you can eliminate the time needed to do appropriate research on which stocks to buy or which investments to get into. If you don’t want to waste your time researching and looking for investment opportunities, then an index fund is a great way to go.
“(Sixty-six) percent of all professionally managed mutual funds failed to beat the S&P 500 Index average — in the past two decades.” If 66% of professionally managed mutual funds can not beat the index funds, why would you want to waste your time trying. You have better odds of winning in Vegas than you do on beating index funds.
Index funds are also cheaper to get into. If you want to get into a professionally managed mutual fund or buy and sell stocks then you are charged a higher commission rate. The commission rates pay for the salaries of those who buy and sell stocks on your behalf. If you choose to buy index funds you will be paying a substantially lower commission rate, which means more money in your pocket when all is said and done.
Bielagus makes great points in how to invest in the stock market when you’re young. I personally have followed his advice and have the majority of my investment money into index funds in the stock market. Buying index funds is also a great way to diversify your investments. Since you are buying shares in every stock, if one company goes belly up, you won’t be in financial ruin as a result.