Index funds can be very profitable if you are planning on investing on stock or bonds when you have little knowledge of how it works. You can accumulate tremendous amount of wealth over a longtime by investing on index funds, it helps you participate in the market with little skill.
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What is index fund?
Not everyone knows what index funds is all about and how you can potentially benefit from it.
Index funds are formed to have a similar operation and performance with that of a major market. It helps to track major stocks and bonds markets.
You can call Index funds a passive investment strategy, because that is what it does, you are investing in a system that follows and track main markets.
index funds
Examples of popular index funds are S&P 500 and NASDAQ100. if you are planning on investing on US index funds then S&P 500 is recommended, because they track up to 500 markets and business in the the country. And if you a lover of tech and you believe in the brighter future of it then NASDAQ100 is the best for you, the track major tech markets.
Risk and benefits of index funds
Risk: As we all know all investment carry some amount of risk and index funds is not exempted. One of the disadvantages is that they are expose to the same risk as the major market they are tracking. If the main markets drops, the index funds also drops.
Benefits
The major benefits of index funds over the major markets is the low fee. Investing in the markets attract many kinds of transaction fees because you are not only doing buy and sell, but in index funds since it is just a buy and sell. Index funds has lower expenses ratio than the major market.
I have given you a little knowledge about index funds and if you want to learn more you can do a deep research on it. I just wanted to let you know that you can make huge amount of money with index funds even if you have little knowledge about the market.
For those who time or show interest in learning about how markets works index funds are just best for you. Just keep investment and be patient, you will definitely reap your rewards.
Note: This is not a financial advice, I'm just saying from my own perspective. The truth is you can still run into loss if you are not careful and do not invest with proper money management, always do your diligent research.