Unfortunately for the average investor, a Stockbroker is basically a salesman looking out for the next commission. Sure, a broker wants his client to do well on his investments, but the broker has to sell stocks to earn his living. We’re going to discuss investing in a mutual fund that comprises 500 of the largest stocks in the United States. This fund is commonly called the S P; 500. The S part is for Standard and the P is for Poor. Standard and Poor is a large company that does financial research. Stockbrokers don’t make much in commissions selling mutual funds. They make more money selling stocks. We are going to focus on investing in the S P; 500 mutual funds.
The S P; 500 represents the 500 most traded stocks on the New York Stock Exchange. If you invest in all 500 of these stocks you own a small piece of what makes America tick financially. It would take a large amount of money to buy shares in each of the 500 stocks. In 1976 John Bogle conceived the idea of a mutual fund comprised of these 500 largest stocks. According to Vanguard Mutual Funds, the S P; 500 stock index fund has grown at approximately 12% annually since 1976. Few, if any fund managers have equaled this.
The market goes up and down in cycles. Perhaps you have heard the term bull market. A bull market means that stocks are rising. Also, there are periods of time, where the stocks go down. They call this a Bear market. There are years that mutual funds lose money, as does the entire stock market. There are also years that S P; 500 funds make money. For the average investor all you need to know is that 12% return over a 32 year period is quite nice.
It has been said that the average person spends more time planning their vacations than they do thinking about investments. For the neophyte investor the S P; 500 fund is a good choice. You don’t need to know very much about stock markets or individual stocks. A professional mutual fund manager and his staff takes care of you.
Mutual funds are not a short term investment. Investing in S P; 500 mutual fund is for the longer term of 10 to 20 years. If you invest your money regularly, say every month for instance, you will be able to benefit immensely when the market is rising. Periodic investment is commonly called “dollar cost averaging”. As an example, if you have an Individual Retirement Account or IRA, investing every month is a good idea. No one can time the market perfectly. When stocks are high in price your monthly purchase buys fewer stocks. Conversely, when stock prices are lower you buy more shares. So it averages out.
It is also very important that you select the provision for reinvestment of your dividends. In order for your mutual fund to grow to its fullest, you must reinvest the dividends. You are compounding your return. By compounding your dividends you make the greatest return over the life of your investment.
Geldanlage is something that should not be taken lightly. You have to be serious and you have to carefully consider a lot of factors. In this way, you will be able to grow your money and achieve your goal which is ultimate return.
Investing in an IRA works best if you start when you are young. The money will compound and produce a greater return. It is predicted that a person that invests early and regularly could be close to being a millionaire by the time they become 50. This happens through the miracle of compounding. If you could invest 10% of your income annually, and left it alone for 40 or 50 years, you would be very well off.
It would be wise to learn a little bit about market cycles. As you get closer to retirement age, you don’t want to withdraw everything on a down market cycle. The market will rise again, and then you can withdraw more money. This is all you really need to know. The mutual fund managers do the investing for you.
There are quite a few mutual fund companies that have S P; 500 mutual funds that you can buy. If you are buying for an IRA, there are some that allow you to invest $150 a month or less. Vanguard is the largest of them. You can always switch from a smaller company to one of the giants as your dollar amount in your IRA increases. The main thing is to get started early. Use dollar cost averaging and make sure that you reinvest the dividends. Regular investment for your retirement is all you need.