ETF / Index funds
One of my favourite investment strategies is investing in ETF's or Index funds. Let me show you how this works.
If you want to actively invest, but don't have the time and/or willpower to do the necessary research to invest in single stocks, you might want to consider investing in an Index fund or ETF.
An index is a collection of stocks, for instance, the S&P 500 is a collection of the 500 largest companies in the U.S.A. When you invest in an Index fund or ETF, you actually own a small share of all of those 500 companies. This is the ultimate example of diversification.
So basically, by investing in an Index fund or ETF, you invest in a whole market. In general, the market always keeps on growing. Owning the whole market also means that when one company isn't doing too well, you have a large safety net.
The S&P 500 gets an average return of 10% per year, this doesn't look like a lot, but believe me, if you hold your position, or even better, keep adding to your position, your rewards will be going through the roof. This happens all because of a process called 'compound interesting'.
If you start your first year with 10%, you end with 110%. The second year, you'll have an interest of 10% on this 110% you ended your first year with. This means your 'actual' interest will be 11%. You'll end your second year with 121% of your initial investment. When years go by, you'll create a snowball effect and your interest will keep rolling, and rolling, and rolling...
When you keep adding to your position, you'll find that at some point, your yearly interest will be bigger than your yearly investments.
You should also note that it is best to start early when it comes to steadily investing into Index funds or ETF's. For every 10 years you wait, you will halve your eventual portfolio.
A website I like to use to calculate compound interest is https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
A YouTube-channel I like to watch for investment strategies is https://www.youtube.com/c/MarkTilbury
I hope you have learned something about Index fund / ETF investing and I hope you found this blog interesting! If you have something to say about this topic or about my blog, please leave it in the comments. I hope that you can learn something from me, and that I can learn something from you.
DISCLAIMER: THIS IS NOT FINANCIAL ADVICE, PLEASE DO YOUR OWN RESEARCH BEFORE INVESTING.
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