Buy an Index Fund

Investing in an index fund is a great way to diversify. But it is very important that you buy the correct index fund for your needs. This article tells you how.

An Index Fund is a type of investment that seeks to duplicate the movements of an index of a specific financial market, like the S&P 500. Owning an index fund is a great way to diversify. You can create your own personal "index fund" by investing is hundreds of different stocks, but this proves to be very costly and quite time consuming. Therefore, investing in an actual index fund provides you with the return of the index that it's tracking with low fees and low time management.

Since there are many different types of indexes, there are many different index funds. The following is a list of indexes, and the ticker symbols of the best index funds that track them: S&P 500 (most common) - SPY, VFINX, SWPPX, FSMKX S&P 400 (mid-size companies) - SPMIX, VIMSX S&P 600 (small-size companies) - SMCIX NASDAQ 100 (largest NASDAQ companies) - RYOCX Russell 2000 (small companies) - NAESX Wilshire 5000 (almost all U.S. stocks) - VTSMX, FSTMX

The United States economy has been going through some tough times lately. All of these indexes are down sharply from their all-time highs reached in 2007. If you have some extra money to use for investing, but not much time, I would highly recommend slowly buying some shares of an index fund.

As far as deciding which index fund is for you - that depends on how okay you are with risk, and how soon you might need your money. In general, smaller companies are more riskier than larger companies. So invest accordingly. But remember - the greater the risk, the higher the potential return. Good luck and please feel free to ask questions!