Invest Time and Money : Guide to pick best index funds 2024
If there is any secret to getting rich then it’s investing. Invest your money in the stock market and give it time to grow. Compound interest works like magic and your money will grow faster than sitting in your saving accounts.
The hardest part is most of us are not knowledgeable enough about where to start and are scared of losing our hard-earned money. I was the same, and after reading (you can read here) and watching countless videos on investing, I learned that investing isn’t hard. One can and must keep it simple and start with Index funds, right now.
The key is in not spending time, but in investing it.
All about Index Funds
Index funds are the easiest way to start your investments. I will try to keep it simple with one or two sentences answers to get you started. I will provide the links to other posts and videos if you want more information.
what is an Index?
An index is a way to track the performance of a group of similar stocks in the market.
The most famous indexes are
what are index funds?
Index funds are the funds that hold similar stocks of the market indexes to perform similar to those indexes.
For example, if you find an index fund that tracks the S&P500 index then the fund will hold similar stocks to the S&P500 index and will perform the same in long run.
By Periodically investing in Index Funds the know-nothing investors can actually outperform most investment professionals.
Why Index Funds?
Index funds are famous because they are simple and they make you money in the long term. Here are a few more reasons why.
- Low or No management fees
Index funds are passively managed and hence their management fees are really low. Passively managed because fund managers have to blend the stocks similar to the market indexes to meet the goal of not trying to beat the market but go along with the market.
- Index Fund outperform most active funds
S&P500 index has returned 8% yearly average returns since 1957 (from investopedia.com). If you had invested $1000 in 1957 with an 8% annual return, with no additional contribution, you would have accumulated $136,759.12 by now (check out Investment Calculator).
- Your Money is Diversified
By investing in Index funds you invest your money in all the stocks that the index fund holds. You might not be able to buy $3000 Amazon stock but if you buy $100 worth of S&P500 index fund your money is invested in the top 500 companies like Amazon.
The best thing to do is BUY 90% in S&P500 INDEX FUND.
Things to consider when buying index funds.
You will not go wrong with most of the index funds out there however you must consider some key points before investing in one.
1. All the index funds are not same
Every brokerage company offers its versions of index funds, and they all are different. Read about the index funds before you invest.
2. The Expense Ratio must be less than 0.5%
The expense ratio is an asset management fee for the amount of money you invest in index funds. For example, if you have a 1% of expense ratio then for every $1000 invested each year you will be charged $1. Expense ratios less than 0.5% are considered best for index funds.
3. Index fund will also go down if the market goes down
As I had explained earlier Index funds track the indexes on the market and if the market goes down then your funds will go down with it too. Remember investments are for the long term, in the long-term (more than 10 years) you will always have a positive return.
4. Initial Minimum to buy Investments
Few index funds like VTSAX (Vanguard Total Stock Market Index Fund), ask $3000 for the initial investment. VTSAX is famous for its track record but not everyone has $3000 to start with. Fear not, there are no minimum index funds that perform similar to VTSAX.
Best Index Funds 2024 and for future
Enough about the benefits of index funds and let’s dive into the list of the best index funds for beginners. I personally hold these index funds and I have considered the above checklist to buy those, which is
- Low expense Ratio / No expense Ratio at all
- No minimum to buy
- The blend of stocks they hold
1. FZROX (Fidelity Zero Total Stock Market)
FZROX Index fund from Fidelity is one of the best funds. It has no expense ratio and no management fees, that’s right no fees at all. Here are some of the key features of why it’s the best.
- NO Expense Ratio
- NO Management fees
- ZERO minimum to start
2. FDEWX (Fidelity Freedom Index 2055)
FDEWX Index fund is a target date index fund. The index fund is targeted for 2055 and it will adjust the risk as the target year 2055 comes closer. You don’t have to worry about readjusting your portfolio as retirement comes closer.
- Expense Ratio of 0.12%
- ZERO minimum to start
- Your portfolio is readjusted for you as the retirement comes closer
3. FXAIX (Fidelity 500 Index Fund)
FXAIX Index fund tracks the S&P500 index. The stocks holdings of this index match the stock holdings of the S&P500 index.
- Expense Ratio of 0.12%
- ZERO minimum to start
- Your portfolio is readjusted for you as the retirement comes closer
4. few more Index Funds
You won’t need more than the above index funds for your long-term investments but if you have the money and would like to explore more index funds then you can check out these index funds.
Index Funds eliminate the risk of individual stocks, market sectors, and manager selection. Only Stock market risk remains.
Conclusion
Index funds are the door for everyone to get into the stock market with minimal risk. Index funds are for lazy, index funds are for average folks but it doesn’t mean you won’t make money from them.
Index funds are proven best investments for the majority of people in the long term. Invest now, keep investing, and watch the money grow with the market.
I have listed some of the best index funds one can start in 2021, and keep investing in them in the future. Keep your investments simple and you won’t go wrong with any one of the above index funds.
Building a portfolio around index funds isn't really settling for the average. It's just refusing to believe in magic.
3 thoughts on “Planning for the Future: A Sneak Peek into the Best Index Funds 2024”
Nicely explained. One question for you.
I do see most of the companies offer Blackrock funds for 401k investment. What’s your thoughts on the funds offer by blackrock?
BlackRock is an investment firm so I don’t think it matters a whole lot who manages the fund, in my opinion.
You should look at the fund where your 401k money is invested in?
For example, my 401k is managed by Fidelity (in your case it’s BlackRock) and my money is invested in target-date index funds (Target 2060 fund).
You should have some control over choosing which index fund you want to contribute to.
I hope that helps.