these periods of uncertainty
have historically been a great
time to invest for the long
term because people forget
the cyclical nature of the
markets. If you pay attention,
opportunities will arise for
astute investors.
So how does one invest in
a stock index? An index is
a mathematical construct,
so it cannot be invested in
directly. One can buy an ETF
(Exchange Traded Fund),
which attempts to track a
particular index. This can be
bought just like a stock.
One of the great advantages
of an ETF is that the fees are
extremely low. The fees are
usually built into the ETF itself,
so one does have to be careful
which ETF they purchase.
According to ETF.com, the
average U.S. equity mutual
fund charges 1.42 percent
in annual expenses. The
average Equity ETF charges
just 0.53 percent, and I have
seen much lower. They may
seem like small numbers, but
compounded over time they
make a huge difference.Buying an ETF to track the
broad market might sound
pretty boring. You might think
that you can pick your own
stocks and do better—but
most professionals can’t even
do that.According to Vanguard from
1984 to 1998, only 8 out of
200 fund managers beat the
Vanguard 500 index.The funds management
industry doesn’t want you to
know this information. You
can buy a low-cost index,
achieve global diversification,
pay a minimal fee, and thenoutperform the majority of
actively managed funds! All
from your phone or device.
You can see why Warren
Buffet is leaving 95 percent of
his wealth in a stock index, as
per his will.One index most likely to
perform well over the long
term is the Euro Stoxx 50.
It’s an Index that tracks the
top 50 stocks in Europe.
But isn’t Europe about to
fall apart? Rest assured that
these are large multinational
conglomerates, whose
revenues are not relying
on Greece to get their act
together.In fact you probably provide
many of these companies
with part of their revenues.
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