Index Funds: What They Are and How to Start Investing
TL/DR
Index funds are not as complicated as they sound. We go into a lot of detail below for anyone wanting a deep dive, but they can be summed up pretty easily:
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Every time you buy a share of an index fund, the amount you invest is distributed across dozens, hundreds or even thousands of companies. This is known as “diversification.”
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The companies that make up an index fund are based on a market “index.” An S&P 500 index fund invests in the 500 or so companies in the S&P 500 index, for example.
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Making regular contributions (monthly, for example) to large index funds often makes up the backbone of a long-term investment strategy. We should note, however, that exchange-traded funds (ETFs) achieve the same result, and typically have lower…
