Index Funds: An easy way to diversify your portfolio

Index Funds. Diversify. Portfolio. Buzzwords like these are often baffling to the new investor. Just as keywords, though, get you where you want to go on a computer search, such terms can take first-timers a long way in building wealth.

“Index Funds offer a resilient investment strategy,” according to Sapling.com, “as well as an easy way to diversify a portfolio.” Smart investors understand all three of these big stock-market terms:

Portfolio. An investment portfolio refers to the total investments people have made to reach their financial goals. Complete investment portfolios include assets from various classes, such as stocks, bonds and cash reserves, along with alternative investments, like real estate and hedge funds. Financial statements, mailed or emailed regularly, keep investors posted on the progress of their portfolios. Monthly or quarterly statements track their cash, stock positions and dollar amount of each holding. Investors can also view their portfolios in real time online for day-to-day, even hour-to-hour, updates.

Diversify. Most financial planners advise their clients to diversify their portfolios. Diversifying is a strategy that minimizes risks and increases earnings by spreading investments across various economic scenarios. Well-diversified stock portfolios include investments from different regions, as well as various industries and business sectors. No one-size-fits-all, and no portfolio suits all investors. For example, younger people are likely to invest in smaller or newer companies as growth stocks for their profit potential. Retirees, however, gravitate towards stock with less risk in more stable, mature companies.

Index Funds: Specific types of mutual funds, called Index Funds, contain a variety of investments that mirror long-term successes. Composed of large U.S. company stocks that generally outperform three-fourths of the market, most index funds’ long-term prospects are overwhelmingly good. While the stock market has its ups and downs, index funds create opportunities for low-risk investments for newcomers to the market, or for anyone who wants to reduce risk by investing in a large pool of proven winners. Since most index funds are predictable enough to be managed by a computer, investors also save on hefty fees charged by managers with prestigious MBAs and their well-educated, well-paid research teams.

For Expert Advice. To start an investment portfolio (or improve the odds of your existing one), diversify your earnings and reduce your risks, contact Ronald Van Surksum CFP, rvansurksum@aamllc, or call him at (616) 450-8439, or (616) 531-5220.

 

Manage Your Money . . . financial facts for a brighter future provided by Advancd Asset Management LLC                           Follow our blog: aamllc.com                  Ronald Van Surksum, CFP                     4555 Wilson Ave SW – Suite 2               Grandville, MI 49418                                               rvansurksum@aamllc.com                 Phone: (616) 531-5220                            Cell: (616) 450-8439

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