Buy index stock

In my previous posts about buying of the stocks I have suggested you that you should buy gas stocks or the buy foreign stocks but this time I just saying that you buy index stocks and enjoy the market vagaries from a distance. The benefit is that when you buy index stocks will be mirroring the market and hence you need not invest in individual funds. 

If you need to invest in index funds then you need to understand how Dow Jones works as well as know what is Nasdaq before you can even think of investing in the so called index funds 

The stock index has a list of companies which are there based on the certain criteria and each of these stock prices are used to calculate the stock index. For example Russell 2000 has about 2000 small cap stocks which are tracked. 

The index tracking stocks which is there and is most commonly used is the S&P 500 index stock which is actually and electronically traded fund called spider or the SPYder. The there is another which is the Diamond Series Trust Stocks which tracks the Dow Jones industrial average. 

Apart from that the really low cost method of investing is to invest in the Index funds. These funds merely have the same composition as the stock market indices and almost all the big mutual fund companies have this type of stock index. 

The example of this are the 

Vanguard 500 which tracks S&P 500. 

The benefit of having an index fund that they have generally very low fees or rather no management fees as there is no actively managing the stocks on those funds. The added benefit is that you do not have to worry about diversification and it is automatically granted in an index fund. You can buy the shares of an index fund in the same way as that of the mutual funds which means at the NAV. Check this if you can get rich off the mutual funds. 

A lot of investors then ask that how much you can make and the truth is that you can actually make at least as much as the S&P grew in the last few years. Just imagine that is what will be there based on the mere passivity of the investment. 

Now if you want to have more active involvement and try to do the dollar cost averaging then you may be able to enjoy a lot of success and may be even better the returns in the index funds. 

The most famous NASDAQ tracking stock is an ETF which is

Nasdaq-100 Index Tracking Stock (QQQ:AMEX)

iShares Russell 2000 (IWM)

iShares MSCI EAFE (EFA)

Total Stock Market VIPERs (VTI) – This represents the broader 5000 Wilshire index fund.

 The other thing to note is that if you really want to  do your own labor here then you may even better your performance by getting the list of the S&P 500 stocks or the list of Dow Jones stock or even the list of Nasdaq 100 stocks and start them adding to your portfolio. 

If you want to know more about the stock market strategies then read my earlier post on stock investment strategies and also on stock analysis checklist

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  5. Get rich off the mutual funds

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