| Harness the power of your investments by | | | | could be a good investment. If history were an |
| starting to invest young. There are simple stock | | | | indicator of future performance, it would be clear |
| market investment vehicles that will allow the | | | | that over time, you would generate solid returns. |
| inexperienced investor to achieve solid, long-term, | | | | The key benefits associated with broad market |
| returns without having to be a stock market | | | | index investing are: |
| expert. | | | | 1) Higher Returns - According to Standard & |
| Importance of Investing Young. It is essential that | | | | Poor's, less than 30% of managed funds in 2006 |
| you start investing young; if you don't your | | | | beat broad market index investing. What's more |
| actually loosing money and missing out on the | | | | over the last ten years the average person that |
| most important thing young investors have in | | | | invested in broad based index funds has beaten |
| their favor 'compounding interest'. | | | | the returns of most mutual fund investors. |
| Each year that you have money and are not | | | | 2) Added Diversification - Diversification lowers |
| investing you're loosing about 3% of its value due | | | | risk. If you invest in one individual stock and bad |
| to inflation. So after 10 year of sitting on $100 | | | | news comes out on the company you could loose |
| cash it could be worth less than $75. What's | | | | a lot of money fast. Now, for instance, if you're |
| more, by investing young you benefit because | | | | invested in an S&P 500 index fund and one |
| the money you made from your investments - | | | | stock has bad news you really don't care. That |
| make you more money. Making money from | | | | will only affect your investment one five |
| money you've already earned from your | | | | hundredth. |
| investments is known as 'compounding interest'. | | | | 3) Lower fees - Index funds fees are typically |
| This powerful force can make you a millionaire | | | | lower and are often around .5%. While the |
| well before retirement age with saving as little as | | | | average mutual funds fees are around 2%. Over |
| $70 per month. | | | | time this will make a big difference in your overall |
| Now that you know you need to invest; how do | | | | return. |
| you start? The stock market offers a great place | | | | 4) Passive investment - When investing in |
| for young investors to get their money working | | | | individual stocks or mutual funds it is important to |
| for them; the good news is that you don't need | | | | keep your eye on the market and up-to-date |
| to have a ton of money to start. Plus, with the | | | | with current trends. Investing in broad based |
| investment vehicle discussed in this article, you | | | | market indexes takes less stock market |
| don't need to be a stock market expert to begin. | | | | knowledge and requires less time to track. |
| What's the solution? An ideal investment for | | | | The earlier you start investing the sooner you can |
| young and inexperienced investors is to get on | | | | reach financial freedom. invest with broad-based |
| the road to financial independence are low-cost | | | | index funds that have similar returns to the |
| broad market index investments. Warren Buffet | | | | overall market, because then we are receiving |
| states, "A very low-cost index is going to beat a | | | | similar returns while hedging our portfolio - again, |
| majority of the amateur-managed money or | | | | investing for young and beginning investors is all |
| professionally-managed money." Reduced risk, | | | | about diversifying to improve your chances for |
| solid returns and it one of the simplest | | | | financial success. |
| investments you could make. An added bonus is | | | | How do I invest? There are two ways for young |
| that it takes only minimal knowledge and about 60 | | | | investors to begin investing in broad market |
| minutes to start getting your money working for | | | | indexes. Both are similar in their returns; but they |
| you. | | | | are different in how the index is bought and have |
| What's a broad market index? A broad market | | | | different fee structures. |
| index is a group of stocks that you can purchase | | | | * An Index Fund is a mutual fund that purchases |
| as one. It allows young investors to buy a | | | | the stocks that make up an index in order to |
| collection of top performing stocks that mimic the | | | | match the returns of the overall market. For |
| performance of the entire stock market. Since | | | | example, if investing in an S&P index fund, |
| these index funds allow you to earn returns | | | | that mutual fund would own all the 500 stocks |
| similar to the overall performance of the market | | | | that make up that particular index. Index mutual |
| it greatly reduces the risk. This is an advantage to | | | | funds may require a minimum investment, but |
| the beginning investor since it is safer than | | | | some can be waived with a direct deposit |
| investing in a single stock or some mutual funds; | | | | investment plan that automatically invests money |
| plus there is a history of double digit returns. | | | | every month from your account. Typically, fees |
| Broad based index investments may not sound | | | | on index funds are higher and there are minor |
| like something you know; however if you ever | | | | restrictions on when you can sell. |
| watch the news chances are you have heard of | | | | * An Exchange Traded Fund (ETF) is similar to an |
| this investment. -The Dow Jones Industrial | | | | index fund, with the benefit that ETF's can be |
| Average index contains 30 top industrial stocks. | | | | bought and sold similar to an individual stock. An |
| -The Standard & Poor's 500 contains 500 of | | | | illustration of an ETF is the "Spiders" (American |
| a variety of different stocks. -The NASDAQ 100 | | | | Stock Exchange: SPY symbol). Each share of a |
| contains 100 stocks that are mostly in the | | | | spider contains one-tenth of the S&P 500 |
| financial and technology sector. | | | | index, and so trades at roughly one-tenth of the |
| When you invest in a broad based market index | | | | S&P price. The management fees on ETFs |
| you actually own a small piece of each individual | | | | are low. There are less restrictions on the sale of |
| stock. For instance, when you invest in the | | | | ETF's when compared to broad based index |
| S&P 500 broad market index, you're buying | | | | mutual funds. |
| a piece of all 500 stocks in that index. So for | | | | Young investors will achieve similar returns |
| each S&P index share that you own your | | | | whether investing in index funds or exchange |
| actually own 1/500th of companies like: American | | | | traded funds, but typically ETFs have lower fees |
| Express, Google, Ford, Nordstrom, Home Depot, | | | | and fewer restrictions. |
| Staples and Yahoo to name a few. | | | | The earlier you start investing the bigger |
| For those young investors that don't want to | | | | advantage you will have. Because there is only a |
| stay glued to their computer all day broad based | | | | minimal amount of money necessary to start and |
| market indexes are great solution. Since this | | | | a low level of knowledge needed to invest - |
| investment matches the overall return of the | | | | broad based market indexes will allow you to |
| market if you believe over the long-term the | | | | start investing young. So quit working for every |
| stock market will continue to rise in value this | | | | dollar and get your money working for you. |