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Great article. I’m into real estate investing right now since I lost my shirt in the last year on the market but I’m interested in diversifying back to stocks. If I had my own trading account such as InvestorsEdge how would I buy an index fund?
Adam: Assuming InvestorsEdge have access to ETFs, there are many that track indexes. For example, two popular ones are:
1. DIA which tracks tracks Dow Jones Industrial Average (which I own) and
2. SPY which tracks the S&P 500
ETFs work like stocks (for the most part) so you can buy and sell them during market hours.
Excellent explanation of the benefits of index funds. (I’m a huge fan, as you know.)
Adam: Before investing in an ETF, be sure to check on its related expenses as well as what commission you’d have to pay.
The primary benefits of index funds are their low cost, and if you end up paying a commission (or a high expense ratio), it could easily negate that benefit.
Good article, certainly got me thinking about investing in index funds.
However, I’d be careful investing all of your money in them as your won’t be diversifying. Yes, there is a great diversification of stocks in the fund, but perhaps you should look to invest in something that has a negative correlation to the stock market too?
Ian: Good point about diversification across asset classes as well as within a particular stock portfolio.
Index funds seem to be quite a good investment option, though they don’t give you whooping returns. Over a period of time they grow steadily to give you good returns.