Welcome

Index Funds. 

Yes, You’re Tired of Hearing About Them 

But this isn’t going away. If you have some, great. Stop reading. The intelligence about them hasn’t changed. Only keep reading if you are investigating this and somehow haven’t yet read much.  

To begin, an index fund is essentially betting on the market. You can pick the fund and you can pick the market, depending what level of control you are searching. For me, I choose an index fund that bets on the S&P 500. In my opinion, this covers the broadest amount of stocks to provide coverage from sector swings and gives a general outlook on the market. That’s pretty much it. 

Index funds are typically ETFs (Electronically Traded Funds), which means that they can typically be bought and sold without trading fees, especially if you are buying an index fund that is part of the house. So that’s the overview. 

Nitty Gritty and What I do 

My accounts are through Schwab. So I take their fund, specifically SCHB, found here: https://www.schwabfunds.com/public/csim/home/products/exchange_traded_funds/summary.html?symbol=SCHB 

If you click on the Portfolio tab, and export holdings, you can see all of the various stocks within the S&P 500 that are part of this. I don’t know if their portfolio changes and if so how often or why. What I know is that they are trying to mirror the S&P 500. So what I know as an investor is that if the S&P is up, I’m up. If it’s down, I’m down. I’m not looking for this fund to be up with the S&P is down because I am betting on the entire market. Meaning, I am betting on the economy to do well. For the top 500 companies to, on average, be doing well. 

The reason you want to use a broad index fund like this is based on this simple fact: for the last 90+ years the market have gone up on average 8.5% every year. Now that’s an average, not a yearly expectation. So in order to achieve that average, you need to be in for a while. However, when this trend began to become solid after The Depression, less risky investors sought to invest in the whole market rather than try to pick winners (and losers) from within it. After all, if the market has performed at this rate for this long, and that return is better than savings accounts or money markets, why don’t do this? Well, I agree. And now that they are ETFs, they are even easier and cheaper to buy. 

My Strike with Index Funds 

Again, all I have ever bought is the SCHB. I’m sure there are others out there, but they are all trying to do the same thing, so don’t feel you have to get that one. Just find one that is doing what I described that is ETF and no fees. Cause you are going to buy a lot of them. 

What I aim to do, and this gets complicated because it is tied to my other investment activities that aren’t listed on this page, is to invest around 25% of my portfolio on this index fund. Look, I have several accounts and have different portfolios for each, but what I aim for is around 25% of my total holdings to be in this index fund. If I looked today, it isn’t exactly 25%. It is really just a guide and there were swings on either side as I was building up my investments. It is much easier to calculate what I need on each round of new investments.  

The reason I do this, in brief, is that it anchors my account to the market. I am 40 and still investing fairly aggressively, and by having 25% locked up in broad growth, it gives balance to the account and keeps everything steady. 

But there are some people I know who have put everything into index funds for a long time, and I mean everything. It is not a bad strategy and when they did it, it turned out to be a great one with fairly low risk. You can decide for yourself. I’m not here to tell you what to do. I’m here to tell you what I do. 

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