Which index funds are the best? Which index funds should I invest in?
There are a lots of questions and not so many good answers. There are many people claiming that they are the “experts” in the investing field but trust me, as someone who have been in the investing world I can tell you that 70% of these so called “experts” on the internet didn’t invest a cent in the market or read a page of a investing book.
And that’s why I offer you a step by step journey on how to find good index funds.
Step 1) Pick which index
For the most part every index fund tracks somehow different indexes. So its important to decide which index fund works best for you.
Keep in mind that there are indexed which are composed of stocks and a lots of other assets which are chosen based on:
Location / Geography
These funds which are in this one, are focus on stocks which are trade on foreign exchanges or even on a combination of international exchanges.
This one is about emerging markets and other nascent.
Company size and capitalisation.
Here the index funds which are sort of tracking small, medium-sized or large companies
Here are we talking about the funds which are tracking domestic and foreign bonds, commodities, cash etc
Business sector or industry.
And on this last one are we talking about funds which are focused on consumer goods, technology, health-related businesses and every other field and industry.
Step 2) Select which index fund
After you have finished step 1 and decided which index you are most interested in then the time comes to choose which corresponding index fund to buy.
Most of the time it comes down to the cost. And if it is worth of buying or not.
The low costs index are pretty cheap to run and manage. and it is because they are for the most part automated to follow the shifts in value in an index.
However it is important that you don’t assume that all index mutual funds are cheap.
Keep in mind that even that these indexes aren’t actively managed by a team of well-paid analysts, they as well as the rest have with them some administrative costs.
And these costs are for the most part a subtracted from each fund shareholder’s returns as a percentage of their overall investment.
Step 3) Decide where to buy.
This is the last step and as important as the two once above this one.
You as an investor, trader or whatever you choose to call yourself can buy index in two ways.
The first way is buying the index through a brokerage and the second way is buying the index through a mutual fund company.