Are you looking for reasons why you should invest in index funds? I cover three main reasons for investing in index funds in this blog post. If you are in a hurry and prefer to watch the YouTube video instead, then click here.

In this blog post, I will cover 3 reasons why you should invest in index funds. What’s an index fund? It’s a collection of stocks, bonds or securities that are NOT actively managed by a fund manager and its matches or tracks a particular market index.

For example, if an index tracks the Standard & Poor’s 500 — which is an index of 500 of the largest American companies — the index fund will buy shares from every company listed on that index (or a representative sample of stocks). An investor then buys shares from the index fund, and the fund’s value will mirror the gains and losses of the Standard & Poor’s 500.

#1 Reason Why You Should Invest In Index Funds: Investing in Index Funds allows you to avoid the unnecessary risks of using a broker or financial advisor

When you invest in index funds you avoid the unnecessary risks of using a broker or financial advisor. Not only are there are a lot of incompetent brokers and financial advisors, there’s also a conflict of interest. It’s in your best interests, to have the lowest fees possible taken from your investment returns. However, what your financial advisor earns comes out of the return on your investment – and he or she wants to make as much money as possible for himself or herself. With that said, I do use the services of financial advisors. But not to buy securities. I use their services if I need advice about life insurance or disability insurance.

Why You Should Invest In Index Funds
Click the above image to go to YouTube to watch my “3 Reasons Why You Should Invest In Index Funds” video

#2 Reason: They make it possible for you to avoid the risk of purchasing individual stocks and incompetent mutual fund managers

Since you’re investing in the entire stock market, you avoid the risk of purchasing individual stocks and mutual fund managers – who mistakenly believe they can pick winning stocks. If you look at company’s that were winners years ago – such as Kodak, Enron and General Motors – they eventually became losers. And according to a recent study, 92% of mutual fund managers cannot beat the market in the long run.

#3 Reason: Investing in a traditional index fund allows you to avoid “Market Sector Risk”

Market Sector Risk is the risk you take on when investing in individual sector funds such as Healthcare, Energy, Gold, Utilities and technology. Investing in a traditional index funds allows you to avoid sidestep this risk. If we take a look at the stock market back in the 1990s technology stocks were booming. And then we had the dot com bubble of 2000 and many investors lost their life savings. But When you invest in an index fund – you’re investing in a variety of market sectors.

I’ve just given you 3 Reasons Why You Should Invest in Index Funds. Before I end this blog post, I want to make a wish for you. No, I am not going to wish you lots of luck with your investments 🙂 Instead, I am going to wish that you are blessed with many problems and challenges.

When I look back, I owe much, if not all, of my financial success to my problems and challenges. That’s why I encourage you to embrace your problems and challenges and be grateful for them. You’re more committed, more focused, and much more effective when you have no other choice. You’re more likely to succeed – when you MUST succeed.

Great financial success didn’t happen in my life because I didn’t have anything better do with my time. It happened in my life – because there was no other choice.