The value of your investments in the stock market can go down as well as up.
There are many different strategies to take when investing which you should look into.
Here I will explain the simplest, lowest time commitment and most consistent strategy for beginner investors.
Index funds hold a portfolio of stocks which mirror that of a designated index, aiming to match its performance.
Indexes can be any selection of stocks/markets like the S&P 500 (500 biggest companies in America) or FTSE 100 (biggest 100 companies in the UK).
Choosing individual stocks is tricky and whilst this is an old study it is still relevant:
“John Bogle, the founder of mutual-fund firm Vanguard Group, found that for the 20 years ending 2003, the S&P 500 Index returned 13% per year, while the average mutual fund returned 10.3% and the average investor achieved just a 7.9% annualized return.”
Index funds also benefit from being passively managed since they don’t require research and therefore have minimal management fees
Timing the market is really hard and I also wouldn’t recommend this unless you are an expert. Instead what is more important is your time in the market and being like Sarah in the following example:
