More Reasons to Invest In Index Funds

by | May 27, 2020 | Uncategorized | 16,933 comments

reasons to invest in index funds

In today’s blog post, I will cover 2 more reasons to invest in index funds. In another blog post, I gave you 3 reasons why you should invest in index funds. If you missed that blog post, at the bottom of this blog post, I’ll leave a link to it –In that blog post, I also explained:  “What is an index fund?” Today, I’ll give 2 more reasons – why you should invest in index funds.

Reason Number 1: It is to your Tax-advantage to Invest in Index Funds.

When you own a mutual fund, you’re not only taxed on profits when you sell your shares. You’re also taxed on the profits the mutual fund manager earns when buying and selling shares – whether or not you receive the profits in cash or reinvest them in more shares.

By the way, the strategy of mutual fund managers is to buy and sell stocks like crazy. In fact, according to a recent study, a typical mutual fund held a stock on the average of just 19 months. What does this mean to you as an investor?

It means that you may find yourself liable for short-term capital gains – which are taxed – at higher ordinary income rates – as opposed to – the lower long term capital gains rates – which are so typical of index funds – With index funds, the strategy is to buy shares and let them grow and compound over time.

Reason Number 2 – Index Funds have Low Costs.

One lesson we learn early in life is that you get what you pay for. If you pay more,you’ll get a better house, a better car, a better education, better airline seats and better food.

That’s why we tend to believe if we pay more for costly mutual funds andexpensive financial advisors we’ll getbetter results. But the complete opposite is true when investing in the stock market. By investing in an index fund, you can pay as little as POINT ZERO FOURPERCENT in fees.   NOT FOURPERCENT.  NOT POINT FOURPERCENT. But POINT ZERO FOUR PERCENT. But the fee that you pay for the management of a mutual fund can be as high as 1% or 2% or even higher. That’s 25 to50 times more than what you’d pay in fees with a traditional index fund.

I’ve just given you 2 more Reasons Why You Should Invest in Index Funds.Before I end this blog post, I want to remind you that no matter what you may be going through in life- no matter how negative the experience is, there’s still positive value that you can snatch from that negative experience.

If you’re fearful about your financial future, there’s value in that fear because you can re-channel that fear to motivate you to learn and better prepare yourself financially. If you’re uncomfortable or unhappy about your current financial situation, then allow that discomfort and unhappiness to energize you to create a better financial future. If you’ve been disappointed by someone or something, use that disappointment to make yourself wiser, stronger and more resilient.

Positive value is not something that you have to wait on to come to you. It’s always therefor you to use and deploy at your will. Seek positive value from every situation. Not just during times of joy and happiness. But also during times of adversity and disappointment.

If you missed my previous blog post covering 3 Reasons Why You Should Invest In Index Funds then click here.

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