Low- Cost Index Funds

Investing today is easier than ever!  One of the best and cheapest approaches is through Low-cost index funds. The creation of these funds has transformed the investing world. Investment companies like Betterment and Wealthfront use these type of funds to help keep costs low for the investor that’s you!  Companies like Schwab and Fidelity have also added their own low-cost funds to compete with them.

So what is a low-cost index fund?

Typically a Low- cost index fund is a S&P 500 style account meaning it holds stocks in the top 500 companies.  What makes it low cost is that most investment companies are charging you minimum expense fees or even in some cases no fees. Meaning considerable savings to you. The company I know the best is Schwab.  They have an account which costs 0.02% operating expense with a minimum opening of $1. Practically every company out in the market today has something similar to this. Fidelity has even come out with entirely free funds!  The idea is merely to be the most attractive investment company to get you to invest with them. So, read all the requirements carefully! For example, some companies to keep the low discounts they require a minimum investment to keep an account active.

A lot of these low-cost style funds can be considered boring.  They don’t have huge gains, but that also means they don’t have huge losses either.  They typically average around 7-10% a year for a 10-year outlook. These funds can quickly provide an investor with a significant foothold as you build a portfolio.

Low- cost index funds are a great way to go for a person who is just starting to invest, building a retirement account, or building a traditional investment account.

My personal rule of thumb for investing and one I’ve heard time and time again is that you start investing using your employer contribution IRAs and Roth IRAs.  Invest up to 15% of your income or max out the IRAs. You can build these IRAs outside your employer if you wish. Then invest in traditional investment funds. This method has been mentioned several times in books and podcasts.  It’s also one which I personally use.

Please make sure you read all the guidelines so that you know how much you must continue to invest.  You want to receive the best bang for your buck.

I know it’s been sometime since my last post. In short we welcomed our baby boy into the world in February. Life has been a little crazy the past few weeks. Also I have been working on some side hustle projects. I’m hoping to get back into a more consistent schedule for post again. Thank you!

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