Looking for your investments to beat the stock market? Good luck with that.
You don’t have to look far or wide to hear the news, but the New York Times summarizes it best: mutual funds just don’t beat the stock market.
“The truth is that very few professional investors have actually managed to outperform the rising market consistently over those years.In fact, based on the updated findings and definitions of a particular study, it appears that no mutual fund managers have.”
Yes, it may be true that over a certain time period, mutual finds are a great bet. But, they’re just that – a bet that isn’t backed statistically. And I doubt you want your retirement funds to be treated like a lottery ticket!
The Best Way to “Beat” the Stock Market: Index Funds
If you’re not familiar, an index fund is simply a fund made up of a representation of the largest stocks in the stock market – thus, the index funds growth mirrors that of the overall market. Index funds ensure that you achieve a return on your investment similar to that of the overall market itself. It’s a great option because:
- it doesn’t expose you to additional risk beyond the risks of investing in general
- you don’t have to actively monitor your investments
- it isn’t a complicated investing vehicle that requires a financial advisor or tons of research for you to understand
When in doubt on where to invest your money, index funds are always a great option.
A Word of Caution with Index Funds
The only potential catch with index funds is if you are investing in an index fund with high fees. All funds charge a fee for their service, some are higher than others – so be sure to do some comparisons before jumping in. Probably the most well-known and most often recommended low-cost index funds is the Vanguard S&P 500, available at most major brokerages.