So, you’ve taken advantage of open enrollment, and set up your 401k account. Or maybe you had one already. The bigger question is:
What’s the best investment to start with?
Looking at all the investment options can be overwhelming—so overwhelming that 65% of employees leave their dough in the paltry-paying money market account option. Don’t make that mistake.
Instead, choose an index fund. It’s a rock-solid first step for any investor, and a great base to build on.
An index fund is a basket of stocks chosen to represent some segment of the market. Index funds don’t have money managers; they are passively managed, i.e. the chosen stocks move in tandem with that part of the market.
What’s so special about an index fund?
- Being passively managed, they cost you much less than actively managed mutual funds, which have a team of money managers at the helm.
- If you go with an S&P 500 index fund or a Wilshire 5000 index fund (usually called a “total market” fund), you’ll get instant and broad diversification across the market.
- Lastly, in general index funds beat their more expensive, actively managed kin when it comes to performance.