Index

Index

Have you ever heard about index investing? Let’s discuss it.

An index is a benchmark in the stock market. For instance, the S and P 500 is an index of the US stock market. Similarly, Dow Jones is also an index of the US stock market.

Index investing means you invest in the companies which are part of that index. Meaning, if you index in S & P 500 index funds, you invest in the top 500 publicly listed companies of the United States of America.

According to Investopedia, from 1926 to 2018, the average return of the S and P 500 is nearly 10%. If we adjust for inflation, that’s around 7-8%. Invest in S and P 500 index funds for a more extended period. Many mutual funds and hedge funds will try to perform better than the index they track but often do not perform better after expenses. Investing a percentage of your portfolio into indexes is a smart long-term strategy to capture the market’s overall movement. The importance of utilizing indexes in a long term portfolio is key.