How to Invest the Easy Way

I've written quite a bit about taking charge of your own retirement by opening up an IRA and making regular contributions. But what if you're like a lot of people and are scared to try to pick individual stocks or bonds? Maybe you just don't want to put in the time it would take to properly research individual companies. If this sounds like you (and there's nothing wrong with that!), index funds may be the way to go for your portfolio.

What is an index fund?
In a nutshell, an index fund lets you invest in many companies -- sometimes hundreds or thousands -- that are part of the same "index." An index is simply a collection of stocks that have something in common. Some indexes represent companies of a certain size, like the Vanguard Mid-Cap ETF (NYSEMKT: VO  ) , which tracks stocks with market capitalizations in the 70th through 85th percentile. Other indexes track stocks in certain industries, such as the iShares U.S. Financials ETF (NYSEMKT: IYF  ) . And some, like the SPDR S&P 500 (NYSEMKT: SPY  ) , track well-known exchanges.

Many index funds are weighted, meaning they hold more of the larger companies in the index and less of smaller companies. For example, the aforementioned financials index has 6.7% of its assets in Wells Fargo, which boasts a market capitalization of $268.8 billion, but just 2.1% in U.S. Bancorp, which is currently valued at $77.7 billion.

There are far too many index funds to examine them all, but here are some of the best choices to help get you started, as well as their historic performance, top holdings, and reasons you might want to buy (or avoid) each one.

Are these dividend stocks a better way to go?
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2978481, ~/Articles/ArticleHandler.aspx, 8/23/2014 1:23:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 16 hours ago Sponsored by:
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASD 4,538.55 6.45 0.14%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/22/2014 3:59 PM
IYF $84.30 Down -0.30 -0.35%
iShares Dow Jones… CAPS Rating: ***
SPY $199.19 Down -0.31 -0.16%
S&P Depository Rec… CAPS Rating: No stars
VO $119.89 Down -0.01 -0.01%
Vanguard Mid-Cap E… CAPS Rating: *****

Advertisement