Vanguard.com: Which mutual fund is best for beginners?
Answers:
You're talking about the Vanguard 500 Index Fund:
https://flagship.vanguard.com/vgapp/hnw/...
I slightly prefer the Vanguard Total Stock Market Index Fund. It invests partially in small companies too, so it is slightly more diversified:
https://flagship.vanguard.com/vgapp/hnw/...
Both are good funds, however. See this recent Vanguard article on index funds:
https://flagship.vanguard.com/vgapp/hnw/...
lol
you cant invest in it its only a guide of how the markets doing.
if you have 40k to spare and want to invest 10k of it just do your research and buy stock directly in a company or 2 or 3
The first responder is incorrect -- you can invest in Vanguard's S&P 500 Index Fund. It's a great fund, and it would be a good place for you to put your $10,000. I've put a link to the fund's description below.
What you're looking for as an "Index Fund". I checked on the Vanguard website, and it looks like they have two S&P 500 Index funds: the Vanguard 500 Index Fund Investor Shares (VFINX), and the Vanguard 500 Index Fund Admiral Shares (VFIAX).
An Index Fund consists of the shares of the stocks that make up those Indexes: e.g., if you own shares a Dow Index fund, then you own shares in a mutual fund that consists of the 30 stocks that make up the Dow Jones Index.
The good thing about an Index fund is that it isn't "managed," and you don't pay a management fee; but the bad thing is that it isn't "managed." If the index goes down, the value of your shares in the fund goes down.
It's a good way to begin investing, but eventually you'll want to be more diversified. An ideal portfolio is a balance of different stocks or mutual fund shares-- large cap companies like the Dow stocks, some technology stocks like the NASDAQ is heavy in, foreign stocks, and so forth. And over time you want to learn about various styles of investment and look at specialized funds. If you have a diversified portfolio, you decrease your risk of any one fund tanking and taking your investment down.
If I were you, I would take some of the $30,000 that you're not investing in an S&P Index fund and spend it on a couple of reference books or subscriptions to financial magazines. There are also some good TV programs-- PBS' Nightly Business Report is a good one to start watching, and there are others. These will help you to become familiar with some of the terminology and to learn what issues tend to be of concern to the stock market in general.
You are very much to be commended for starting to invest now, at age 23. I'm 50 and I can tell you with absolute certainty that every dollar that you save/invest in your 20's will be like $100 invested in your 40's or 50's. It does take some time to see the power of compounding interest working for you, but once you do, that beats darn near any kind of instant gratification you can get by spending money.
An Index fund is a good start. Keep learning and keep investing!
A few years ago, Vanguard and Standard & Poor's had a "difference of opinion" about fees to use the S&P indexes so they switched their mid- small- and total market index funds to another company's indexes. They also do not use the "S&P" in the 500 name so VFINX is just Vanguard 500 Index Fund.
Now, as to if this fund is ok for you. If you have mid- and small cap and international funds, then this is an OK fund for a beginner to add large cap stocks to their port. If this is the first investment for you, you should be better diversified for this "first core" investment. Look to one of Vanguard's Target Retirement Funds instead. They cover the entire domestic and most of the foreign markets.
If you are a beginner, I would recommend seeking the advice of a professional. They can give you some great insight and help you make a decision.
Plus you have some one to talk to about it, who is licensed and educated on the subject. I am not trying to discourage you from doing it yourself, just make sure all of your ducks are in a row. Some "no-load" funds are low cost but there is no service when you need it. I would pay a small fee, usually 5%, to get the advice and support you deserve.
One thing that should be noted, by holding back on your full dollar amount of $40,000 you are only cheating yourself. With some fund companies there is a sales charge discount at $25,000, so check before you buy. Also, trying to time the market is one of the biggest mistakes you can make. You can stay conservitibe if you are unsure of the market but trying to time it is like gambling. More often than not, you lose. Working with a pro will give you a non-emotional third party to help you make decisions. Emotions and investing don't mix well.
As far as index funds go, I don't reccomend them. You can get better return with less volitility with a managed fund. An index is only going to follow the market, which can be very volatile at times. Having a risk profile done and a portfolio matched to your tolerence would give you the best long term results.
I agree with Joe--the total market index is better than the S&P 500 index. It adds small and mid-size stocks that you don't get with the 500 index. As for the people who say you need to be more diversified, I say that you are very diversified with the indexes. 500 stocks aren't diversified enough? That is 75% of the U.S. stock market across all different industries. A great place to start.
Jason--most mutual funds underperform the index, and the expenses are far greater than the index.
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