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

Related posts:

1. Best Index Funds – Why to invest in index funds?
2. Explaining the Dow Jones Index for beginners – what is DJIA
3. Stock Market investing for beginners – What is a Stock Market Index?

The first step that you need to have is – Have Gameplan and a Strategy

To get rich investing in the stocks you will need to have a gameplan ready with all the attendant details as in how much you will invest in mutual fund versus how much cash you will hand to make sure that you have money to invest in stock when the opportunity arises.

This is the most critical – Almost all of us will usually invest everything when the market is up and then when the market turns the other way round we have no money to cherry pick stocks.

Have a target identified to sell and also have a stop loss defined.

Always make sure that you have a stop loss mechanism in place as that will help make sure that you are limiting your losses else the stocks in a downturn can deplete you your entire war chest in days.

Long term stocks

But a few stocks which have good fundamentals and make sure that you hold them for good. You will make money off them in may be ten years when they would have given you excellent multiple digit returns.

Also have some volatile stocks in the portfolio to make the most of the current market trends. That way you can make some money in the short term and in some cases they also may turn out to be good long term bets.

Get Rich Mutual funds

Pick the right mutual fund and start building your corpus. Always go for the systematic invest plans so that you can have the benefit of low prices and averaging. Also have a systematic withdrawal plan in place so that as and when you have made a certain amount of money in the mutual finds the units can be redeemed and be in place for use in the so called money market or fixed income mutual funds.

Get rich by investing in Gold

This has been said so many times but gold is one commodity if you play it right. The major thing to know about gold is that gold always runs opposite to the market and that is precisely the reason that either you should have some gold mining stock like Homestake mining or invest in a Gold ETF like GDX . There are gold mutual funds specifically in which you can invest

Be contrarian

Warren Buffet has shown time and again that contrarian is good. Fundamentals are too good. He never invested in the booming internet stocks in the market in 1990’s. Good for him bade for market. A lot of people got burnt by the tech mania.

Always think with your head and see what is good and why people are buying a stock. In the bull run you should be selling and in the bear run you should be picking up good stocks to make money later.

Related posts:

1. Get rich off the mutual funds
2. Gold stock investing – ways of owning gold
3. how to get rich with stocks