Investment is fun! If you want your savings to grow, or start savings at all, its a good option to put the money somewhere nice and calm where it can grow. With this strategy you hope, that it passively grows and you end up with more money after a while just from putting it there.
There are several options to invest money out there which all have their pros and cons. The folks from nerdwallet collected a nice list of the modern alternatives.
Below you find that list of 12 tips to invest you money in.
12
best investments
Of course since it's money we're talking here you should have a good understanding how an instrument is working before you invest. If you are new to the whole ETF thing and want to make a deep dive, I recommend investopedia as a good starting point. You can find all the basics of ETFs as well as the different types and how to buy and sell ETFs.
If you look carefully on that list you find investing in indices on that list.
You can either invest in an index fund which is managed by a "fond manager" who selects the products to invest in for you. A second option is to choose an ETF. In a nutshell this is an investment which follows an index of a selected market. The elements of that index are chosen by objective criteria instead of the knowledge of the fond manager like in an active managed fund. And you as the investor do not need to know all the Details of all Elements of that index.
But what is the beauty of investing in an index?
If you invest in an index which is mirroring a market you find attractive, like the Dow Jones Index or the S&P500, you will participate in all wins and losses of that market. Because the investment is spread over the whole market any big amplitudes of particular elements does not have huge effects.
If you are investing in the S&P500 and one stock does not perform well, your investment is kind of protected, because usually the whole index would not be affected much. In fact it could be the case that the majority of the stock are going up and so the whole index might gain in value.
Of course this counts for both wins and losses!
And to make it very clear: Index investment is not the holy grail. In the article the pros and cons of indexes the author explains it detail. And if you would like to have more clarity to chose between index funds and ETFs, the article "Index Funds vs. ETFs" will definitely be helpful.
Should I decide to invest in an index?
Here is my little pro & con list, which supported my decision
Pros
Cons
Conclusion:
The list above supported my decision towards index investment. And since I do not want to have the costs of an active fund management, my personal investment strategy is to following indices in general.
You should consider the investment objectives, risks, and charges and expenses of the fund or ETF carefully before investing!