The Motley Fool Previous Page 60-Second Guide to Index Investing

Wanna own shares of some of the best-known companies in America and beat the pants off of most mutual funds? It's shockingly easy with index investing. In the next 60 seconds, we'll show you how to do it.

0:60 What is an index?

The Dow, the S&P 500, the Nasdaq 100, the Wilshire 5000, the finger next to your thumb -- they're all indexes. Each is a group of stocks chosen to represent portions of the stock market (except for your index finger, of course). Most index investments are based on the Standard &Poor's 500 (the stocks of 500 leading companies in leading industries) and the Wilshire 5000 (all the publicly traded companies in America). Heard of General Electric, Tupperware, and Microsoft? If you invest in the S&P 500 or the Wilshire 5000, you are a part owner of these companies.

0:50 Why invest in an index?

A broad-market index matches as closely as possible the return of the overall stock market. What's so great about that? Most mutual funds find it hard to do. In fact, less than 20%