exactly what you need to know for smart decisions
How and Why to Invest
with Index Funds
Index funds enable you to diversify your investment - not put all your eggs in one basket, at at low cost.
WHY INVEST VIA A STOCK MARKET INDEX FUND?
A stock market index offers broad exposure to a wide range of companies with one investment at a low cost.
WHAT IS A STOCK MARKET INDEX?
The value of a hypothetical basket of stocks that reflects the performance of a certain segment of the market.
In the United States, the three most popular indices are: the S&P 500, NASDAQ, and the Dow (Dow Jones Industrial Average).
HOW DO I INVEST IN AN INDEX?
As it is not possible to invest directly in an index, index funds were created to mirror the different indexes. Each fund’s performance is judged relative to its index or Benchmark.
HOW DO I CHOOSE BETWEEN INDEX FUNDS?
The easiest choice is a “total stock market” index fund. This type of index offers exposure to companies of all sizes across different industries.
Alternatively, you may choose a fund that compliments your existing investments or choose a fund that matches your interest, such as:
Technology or other industries
Big established companies or smaller growth companies
When comparing funds, consider:
Performance over time (10, 5 and 3 years)
Reputable issuer / fund family (such as Vanguard, Blackrock and Fidelity)
To help you get started a short-list of Total Stock Market and other index funds follows.
Simply click on the SYMBOL to find detailed information.
We do not endorse or recommend any product, the list is provided for your convenience only.
SELECTED INDEX FUNDS (ETF)
Vanguard Total Stock Market ETF
Benchmark/Focus: Entire domestic stock market, blue chips, mid- and small-cap equities
Holdings: 22% technology, 15% financial, 14% healthcare, 11% Industrials
Benchmark/Focus: Dow Jones U.S. Total Stock Market Index
Holdings:70% large-cap (technology, financials, healthcare, consumer, industrials)
iShares Core S&P Total U.S. Stock Market
Focus /Benchmark: Total U.S. stock market
Holdings: 3,000 stocks representing ~90% of companies traded on U.S. stock exchanges
Vanguard S&P 500
Benchmark/Focus: S&P 500 Index
Holdings: Large-cap companies
SPDR S&P 500 ETF
Benchmark/Focus: S&P 500
Holdings: Large companies, such as Apple(APPL), JP Morgan Chase & Co. (JPM), Exxon Mobil Corp.(XOM)
Benchmark/Focus: The Russell 3000 Index
Holdings: 75% of large-cap companies
Schwab U.S. Large-Cap Growth ETF
Benchmark/Focus: Growth Stocks
Holdings: Growth stocks doesn’t mean small companies, it refers to companies with faster revenue and profit expansion than their peers, such as Amazon.com (AMZN) and Facebook (FB).
Vanguard Small Cap ETF
Benchmark/Focus: Small-cap companies (<$4 billion in market capitalization)
Holdings: Smaller banks, retailers, like Burlington Stores Inc. (BURL) and utilities, like NRG Energy Inc. (NRG)
Benchmark/Focus: FTSE Global All Cap ex US Index
Holdings: 6,000 stocks of companies in developed and emerging markets outside the U.S.
Vanguard FTSE Development Markets
Benchmark/Focus: International companies in developed markets only
This content of this post is provided for educational purposes only. It is not and shall not be construed to be investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.