Index Investing For Beginners In 2024 (Step By Step)

The basics of index investing.

Chapters:

0:00 Introduction
01:09 What is an index fund?
02:25 Advantages of index funds
05:13 Choosing the right index fund
08:40 Get a brokerage account
10:14 How to buy index funds

Books on Index Funds

The stock market scares many people away from investing; however, once you start to get to know the stock market, it is not as intimidating as it seems. In this video, I explain a simple, passive form of investing in five steps called, "Index Investing."

Step 1: What Is An Index Fund?

To understand index funds, it is first helpful to understand what a stock is. A stock represents one single company (like Apple) and the price of the stock will be dependent on that single company's performance.

An index fund, however, is a fund that consists of a group of stocks that tracks a market index (like the SP500). Instead of buying one individual company, an index fund is a basket of multiple companies under one ticker symbol.

Step 2: Advantages Of Index Investing

There are many advantages of buying index funds over stocks and in this video I mention three.

1. Lower Risk Investment: Compared to a stock, an index fund (that tracks the SP500) is composed of over 500 different companies. Some companies will do good, while others won't, but the price isn't determined by one company. This lowers the risk as the risk is spread out between 500 companies.

2. Long Term Growth Potential: The market returns an average of 10% a year; however, this is an average over time. Some years will do better while others will do worse. In the long term, the market has always gone up, so there is growth potential in the long term.

3. Passive Form Of Investing: After buying index funds, there is no more work needed on you. All you have to do is buy, hold (and don't sell), and the market will do it's thing. It is completely passive.

Step 3: Choosing The Right Index Fund

There are many things to consider with choosing an index fund and I mention 4 things.

1. Minimum Investment: Depending on how much money you want to invest, some index funds have a minimum amount required. This can determine which invest funds you can invest with.

2. Expense Ratio: The expense ratio is how much money you spend each year for the index fund. Many index funds have an expense ratio under .05%. It is good to keep this as low as possible.

3. Transaction Fees: Transaction fees often occur when you buy an index fund from an outside broker (for example, a Vanguard index fund with the broker Schwab). These can be very high, so to avoid them it is best to choose the same broker as the index fund.

4. Price Per Share: Just to avoid confusion, price per share (the dollar amount of the fund) has no relevance as it is all percentage based. You are not getting a better deal if one index fund costs less than another.

Step 4: Get A Brokerage Account

Once you have researched which index fund you want, in order to buy it you need to open up a brokerage account. The biggest brokers are Charles Schwab, Vanguard, and Fidelity. You simply open an account on their website. They will be where you can purchase index funds.

Step 5: How To Buy Index Funds

Finally, once you have a brokerage account you can now purchase an index fund through your broker. Every interface works differently; however, your broker can provide you with the guidance on how to do it.

It is important to note that index funds, usually, trade once a day once the market closes (compared to stocks that trade every second). Once the market closes, you will get that price for the index fund.


**I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make. Links above are affiliate links where if you click and order, I will receive a commission at no cost to you. **

[Manselus-uykz]

Investing in the stock market has HISTORICALLY provided higher returns than other forms of investment. According to Morningstar, the average annual return for the S&P 500 index, which measures the performance of 500 large-cap stocks, was approximately 10% from 1926 to 2020.

[WilliamTurner-odij]

If your not comfortable picking individual stock, consider investing in index funds or ETFs. These funds offer immediate diversification and often have lower fees than actively managed funds.

[SCOTTDisick-ycx]

3 years ago, I started investing with $300k, but I've only made about 6% total, or 2% per year, which my friends say is very low. I also put $800k into a 401k with a financial advisor, and it's now worth about $1.2 million after 10 years. I think I need to revamp my portfolio. Any advice on what to do with my money would be greatly appreciated.

[Joegolberg]

As always, a great analysis. Newcomers often wonder if it's too late to navigate the financial market, but the market is always unpredictable. Trading has more advantages than simply holding, so it's important to learn before diving in. Active trades are necessary to ride the market's waves. Thanks to Walter James Henry’s insights, daily trade signals, and my dedication to learning, I've been increasing my daily earnings. Kudos to the journey ahead!<<

[shannonshuntel]

Great video, I wish they taught me this in college. You've helped my family With your advice. You're such a blessing to this community. As a beginner i was scared of losing my savings but I'm glad i took the right decision that's now favouring me. thanks for your help Ms Susan Kay Mack 🇺🇸.

[carmenalabat]

A part 2, 3, 4, 5 to investing would be so helpful . Wondering how it works once you need to take the money out when you retire . If you can do a step by step in that would be great

[daviddean]

Thank you, Mr. Austin Williams. Waited patiently for this video and I'm so appreciative of your time. May 2023 be special for you, Mr. Austin. Many thanks.

[laddablanks]

I did it, I bought index funds and Tesla stock . Love your videos, thank you Austin

[lynn]

Great presentation! You are doing such a great service with your channel. Thank you for all your hard work.

[RedHeadedRapunzel_]

I’m a very visual learner & I will say that the way you explain things (detailed & using pictures) is very helpful. You’re a great teacher!!

[federicacaruana]

Discovered you three days ago, Austin. I'm trying to catch up with all your videos (got a jam-packed watch later). Keep producing and keep sharing the content. Happy new year!

[terrys]

Thank you Austin for this very important video. I appreciate your time and effort. The video was perfect! Clear and concise! Happy 2023!🎊

[AmberDen]

Opinions on the market diverge; some claim overvaluation due to rapid gains, while others cite strong economic fundamentals justifying high valuations. Raises concern for my $600K
equities going 8% up and 20% down. Should i hold on or sell off my positions and hold cash?.

[victoriaaldrin]

When compared to the supplied benchmark, 79% of fund managers underperform. More interestingly and significantly, when that figure is multiplied by 5, 10, and 20 years, it rises to 90, 97, and 99%. That makes a persuasive argument for index investment, as well as how unusual individuals like Peter Lynch genuinely are.

[Luncheon]

Thanks Austin - your videos and some others from a few noteworthy channels are really the highlight of my YouTube feed.

[Elisasofia]

I count myself successful in trading with the help of my broker who manage and handle my trading account and get me awesome profits. Her strategies are top notch coupled with the little commission she charge on her trade.

[mimi]

Thank you so much Austin for explaining how to start investing on Index Funds I really appreciate the time you took to made this video for all of us 😃

[sarahsolomon]

Thank you so much for taking the time out to teach me about index funding! Clear, concise, and to the point! You’re the best man! Such a value to YouTube! Keep going! ❤❤❤

[eminueatabang]

Austin your advice is brilliant! I came across your YT channel yesterday and have watched two of your videos and have learned a lot. How you explain is very clear, methodical, easy to understand, and practical to apply. Much respect and I wish you all the very best for sharing your knowledge, wisdom and experience.

[jessicasanes]

Omg This has been the best video I have seen explaining investing thoroughly. You broke it down to where I understood it in a way I never had.. Gracias!!!