2 Ways for young investors and beginners to start investing in broad market indexes

Harness the power of your investments by starting to invest young. The earlier you start investing the sooner you can reach financial freedom. 

There are simple stock market investment vehicles that will allow the inexperienced investor to achieve solid, long-term, returns without having to be a stock market expert.

How can I start investing?

There are two ways for young investors to begin investing in broad market indexes. Both are similar in their returns; but they are different in how the index is bought and have different fee structures.

1. Index Funds (Mutual fund)

An Index Fund is a mutual fund that purchases the stocks that make up an index in order to match the returns of the overall market. For example, if investing in an S&P index fund, that mutual fund would own all the 500 stocks that make up that particular index.

Index mutual funds may require a minimum investment, but some can be waived with a direct deposit investment plan that automatically invests money every month from your account. Typically, fees on index funds are higher and there are minor restrictions on when you can sell.

2. Exchange Traded Funds (ETFs)

An Exchange Traded Funds (ETFs) is similar to an index fund, with the benefit that ETFs can be bought and sold similar to an individual stock. An illustration of an ETF is the "Spiders" (American Stock Exchange: SPY symbol). Each share of a spider contains one-tenth of the S&P 500 index, and so trades at roughly one-tenth of the S&P price.

The management fees on ETFs are low. There are fewer restrictions on the sale of ETF's when compared to broad based index mutual funds. Young investors will achieve similar returns whether investing in index funds or exchange traded funds, but typically ETFs have lower fees and fewer restrictions.

Concluding statement

The earlier you start investing the bigger advantage you will have. Because there is only a minimal amount of money necessary to start and a low level of knowledge needed to invest - broad based market indexes will allow you to start investing young. So quit working for every dollar and get your money working for you.

There is only a minimal amount of money necessary to start and a low level of knowledge needed to invest. Broad based market indexes will allow you to start investing young. So quit working for every dollar and get your money working for you. The earlier you start investing the bigger advantage you will have.