Is it worth putting all eggs in one basket regarding crypto?

Diversification outside the Crypto is needed

Warren Buffet has said that the best thing that most people should do is to simply invest in index funds

But what exactly is an index fund?

Here are 10 facts about them that every great investor should know:

First, what is an index fund?

According to http://Investor.gov, an index fund is a type of mutual fund or exchange-traded fund that seeks to track the returns of a market index

S&P 500 index fund tracks the S&P

Total market fund tracks the whole market

You get the idea

Fact 1: The first index fund was created by Vanguard founder John Bogle on Dec 31st, 1975.

At the time it was seen as un-American and viewed by many as "Bogle's Folly"

The fund was later called The Vanguard 500 Index Fund and has a market cap of 165.8 billion dollars

Fact 2: Index funds are basically a basket of stocks

When you own an index fund you essentially own a piece of hundreds and sometimes thousands of different companies

For example, an S&P 500 Index Fund like $FXAIX is comprised of all of the stocks that make up the S&P

Fact 3: Index funds are more diversified in general

Because you own several companies with an index fund, you are automatically more diversified than owning 1 or 2 single stocks

Index funds are not risk-free, but they provide a smoother ride for the long-term investor

Fact 4: Index funds have very low fees

The average index fund expense ratio is 0.2% but most of the best funds available such as the Vanguard Total Stock charge only 0.04% a year

This equates to only $0.04 a year for every 100 bucks invested

Not bad

Fact 5: Index Funds are self-cleansing

Since index funds by nature track a certain index, if a company leaves an index like the S&P, the index fund that tracks it will drop that same company as well.

Index funds are constantly dropping the losers and keeping all the winners.

Fact 6: Index funds are passively managed

A true index fund that tracks an index like the S&P is most of the time passively managed meaning that nobody is buying and selling stocks driving up costs

An actively managed fund is constantly buying and selling to try and beat the index

This is why most actively managed funds have higher fees when compared to index funds

Not beating the market and paying more in fees? Sounds like a bad deal to me.

Fact 7: Index funds are available in a variety of asset classes

You can invest in funds that focus on:

- Small cap

- Medium cap

- Large cap

- International

- Tech or energy

It's more than just the S&P

Fact 8: Index funds are not risk-free

This is the stuff that rarely gets talked about but it must be said:

Index funds could underperform due to fees, expenses, trading costs and tracking errors.

Just read up on any fund before investing to know what you are getting into

Fact 9: Index funds are more tax efficient

Since index funds are not constantly buying and selling securities, they by nature do not generate a bunch of capital gains fees.

At the end of the day, the investor wins

Fact 10: With index funds, there are no surprises

The securities that make up a fund that tracks a major index are public knowledge and easy to look up

With an actively managed fund, a fund manager may take a chance on an unproven company to try and beat the index

This is something that you can't just do a quick Google search on.

You're trusting someone else to make the right decisions on your behalf and that's kinda scary when you think about it

As a bonus here's a list of index funds worth checking out:

Vanguard S&P 500 ETF (VOO)

SPDR S&P 500 ETF Trust (SPY)

Schwab S&P 500 (SWPPX)

Invesco QQQ Trust ETF (QQQ)

Vanguard Total Stock Market (VTI)

Fidelity 500 Index Fund (FXAIX)

Fidelity Total Market (FSKAX)

Hope this is super helpful!

 

#crypto #serey #blockchain #whatis #howto #whento #coins

Love putting index funds to work for me