The BEST 5 Index Funds to Own For LIFE

what's up guys humphrey here so what's the best investing strategy for the majority of investors well the answer usually includes something with index funds and staying lazy index funds are great for those that want to buy and hold not have to pay massive fees for active management and they want to grow their money passively i would even argue that one of the best strategies for the average investor out there is to put most of their money into index funds and simply just check it once a year [Music] so in today's video i'm going to give you a brief overview of what an index fund is and then we'll get straight into it and talk about the five best index funds to own for life i think if that you're new to investing having just one of these funds as one of your core holdings is going to be good for you for the rest of your investing career and as always i'll leave timestamps in the description below and as chapter markers so that you can skip around whenever you'd like so what is an index fund an index fund is basically a pooled type of investment that you can buy within your brokerage account when it comes to index funds the way that works is is basically the fund itself diversifies and buys into many different types of sectors so by buying that one fund you own a small percentage of everything that it owns as well think of it like cows yes cows so a cow is like a stock and if you invest all your money into one cow but that cow all of a sudden falls over and dies one day well all your money is gone along with that cow however you could invest in what's called the herd and by owning the entire herd if one of the cows dies well you're gonna be just fine in both cases you only own a small percentage of the cow or the herd but you'd much rather have the herd because it's more diversified and you have more of your money spread out across many different cows now in this particular example i wonder what the milk is because i actually have some milk right here and i'm trying to think about what it would be but maybe these are like the dividends of the index fund or the cow or the herd that you might actually own so cheers so if you much rather have a real world example let's say you buy into the s p 500 index fund well by buying that one fund alone because that s p 500 index fund invests in all the companies in the s p 500 by buying that one fund you're buying a small percentage of every company in the s p 500. if you wanted to invest individually in each of the companies in the s p 500 that would be incredibly tough but by having an index fund that tracks the s p 500 you essentially can there are other advantages to owning index funds as well including warren buffett saying for everyday investors it is one of the best ways to actually invest your money as well as his regular recommendation is just a low-cost s p 500 index fund okay so then the question becomes if i'm interested investing in index funds am i just going to buy one of the funds or am i going to buy multiple of them that's a good question and my answer is that a lot of the index funds will hold overlapping holdings so you don't really want to be overlapping your holdings but plenty of diversification is always good so if you do have more time to research index funds it is worth adding a few more to your portfolio but if you only have time to buy one index fund that's going to be just fine as well because they're already naturally diversified as a reminder guys just investing anything at all is better than investing nothing so with that being said let's get into the list of five index funds and we're going to start with number five vv iax so vv iax is actually a vanguard value index fund which invests in the stocks of large u.s companies and market sectors that tend to grow at a slower pace than the broad market it typically invests in larger safer companies in short it's mostly about stability and less about growth the return since it was created in 2000 has been roughly six point eight four percent and in the last ten years it's returning about 11 now if you don't know vanguard is the home of the index fund so a lot of vanguard index funds are the cheapest on the market in terms of expense ratios which just means that they have very low fees this particular index fund has 328 total stocks in its holdings and its top 10 holdings are johnson johnson berkshire hathaway jpmorgan procter gamble etc you can tell that these are large stable companies the only downside of this particular fund is that because it's holding so many large cap companies it actually might underperform the broader stock market the other downside of any vanguard index fund in my opinion is that you need to buy it typically on the vanguard.com platform and they usually have a minimum of three thousand dollars to invest in any single index fund but luckily they do also have an etf version of this and it's actually ticker symbol vtv so luckily etfs are able to be purchased from any type of brokerage so you could buy into the vanguard etf vtv which is actually trading at 127 dollars per share right now on other brokerages such as robinhood weeble public fidelity etc all right so the next etf i really want to talk about is vfiax or the etf version is vo and this is one of the most popular index funds that vanguard actually offers it's an index fund that tracks the s p 500 and it's well diversified in that manner in that it actually tracks all the companies in the s p 500 plus a few more this is one of the gold standards of index funds and honestly it tracks about 11 different types of industries and a bunch of different sectors with no sector more than 30 percent of the total weighting in terms of vf iax it has an expense ratio of 0.04 which again is very very cheap it's four dollars per ten thousand dollars that you have invested in it the average expense ratio of a mutual fund or any other type of active fund is about point six three two point seven four percent so it's good to note that the expense ratio on vfiax in particular is very very reasonable now in terms of the holdings it is just tracking the s p 500 which is weighted by market cap so the top 10 holdings are something like this it's apple microsoft amazon google facebook and tesla those are the top six holdings and it just kind of goes down the list from there in terms of the fund returns since it's been created it actually has been averaging about 7.31 and in the past 10 years it's done pretty well at 13.39 now again because this is a vanguard index fund you're gonna need at least three thousand dollars minimum to actually invest in vf iax and that's why i actually gave you the other option of the etf which is ticker symbol v o o if there was only one index fund that i can put all of my money in and only ever check it once per year i would probably choose vfix or the equivalent etf voo so that fund is pretty awesome and so far we've covered two vanguard funds but now i want to talk about number three which is a fidelity index fund this particular one is ticker symbol f-n-i-l-x and this is a fidelity zero index fund what i mean by zero index fund is is it has zero fees and that is one of the biggest draws of this fund now this is one of the newer products that fidelity offers and my guess is is that they're trying to compete with vanguard and take market share over from vanguard over to fidelity by offering these proprietary fidelity index funds fn ilx is actually fidelity's version of vanguard's s p 500 index fund which we just talked about vfiax now it tracks the s p 500 but they can't advertise it as such because putting s p 500 into the fidelity index fund's name actually requires paying a licensing fee which they don't want to do so for now it just labels itself as a large cap index fund but really it's tracking the s p 500 and that's all you really have to know it's only been around for two years and one of the benefits is as i mentioned earlier the 0.00 expense ratio but the other benefit is that it has a zero dollar minimum to invest in it we can see that it actually has the exact same holdings as vfi x which are just the same holdings of the s p 500 weighted by market cap now the only downside i see with this fund is if you can even call it a downside is that you need to sign up for a fidelity brokerage account now if you already have brokerage accounts at say vanguard and it's already well established you might not want to switch over all your assets to fidelity because you might take a taxable event so in that case is it worth the switch over well that's definitely up to you i would actually argue if you're already invested in say vfix where the expense ratio is 0.04 percent or just basically a few dollars per 10 thousand dollars that you invest i don't really know if it would be worth the switching over from vanguard over to fidelity just for this fund if you are a new investor however and you're trying to decide between a brokerage well fidelity definitely looks pretty lucrative at this point because of the xero fee index fund and all their other features so that was number three and that was a great index fund but let's actually talk about number two which might actually provide higher returns just with higher risk it's one of the growth and income index funds that we're going to be talking about today and that's ticker symbol vq npx now this is a vanguard fund that focuses on growth companies as part of their core holdings for this type of fund this fund's main purpose is to outperform the s p 500 so if you don't want to track the s p 500 and you want to take a little bit more risk and try to outperform it then this is the index fund for you it actually tracks over 178 different companies because it's tracking that many different companies it's actually going to start to hold a lot more smaller type of companies that might be a little bit riskier but have the potential for a lot of growth so this is one of those funds that you can actually invest in when you're younger and it's probably best to do so when you're younger because of its higher risk propensity you want to be taking on more risk when you're younger so that you can take advantage of time in the market and hopefully by getting higher returns with this index fund you're going to be a little bit better off towards the end of your investing career so in terms of returns since it's actually been created in 1986 this is pretty interesting here it's returned about 10.72 percent and in the last 10 years it's returned to 13.77 on average it's definitely returned the most since it was created compared to all the other funds that we're talking about today but please keep in mind that it does come with higher risk and a little bit higher reward for that risk i would say there are some downsides to trying this fund out and that is the expense ratio is a lot higher than the other vanguard index funds that we're talking about it comes in with an expense ratio of 0.23 percent not to mention it is a vanguard index fund so you do need to invest at least 3 000 minimum to get in so that fund came with a little bit more risk but it did track 1788 different companies now what happens if we actually want to track the entire stock market is there an option for that well indeed there is and that's actually our number one pick for today the number one pick for today is an index fund which is a three-way tie and all these ticker symbols basically do the same thing they all invest in the total stock market first we have fidelities which is a fidelity zero index total market fund and that's actually ticker symbol f-z-r-o-x that's also tied with vanguard's vt sax which is the total stock market and if you want the etf version of any of these it's vti now the fidelity version will obviously have no fees because it's one of their newer zero index fund products it'll have no minimums and no fees but the vanguard one vtsax will have an expense ratio of 0.04 percent and a minimum investment required of 3 000 now the beauty here of these index funds is that it buys into every single stock in the total market and that's over 3640 different companies this gives you the ultimate exposure to everything and the ultimate diversification to everything so as long as the stock market trends upwards you're going to be making money since its creation in the year 2000 vt sax for vanguard specifically has returned about 7.82 percent and in the last 10 years has returned over 13.78 the etf equivalent has done the same because it just mirrors what's in the index fund and for the types of contenders to just buy one fund for the rest of your life this is definitely at the top of my list i do think that index fund investing is one of the most underrated types of investment strategies out there especially as part of anyone's core portfolio i do think that people do tend to get caught up in day trading options trading and swings trading if you're looking for a set it and forget it type of investment strategy then index fund investing is definitely for you and it's one of the most easiest ways to grow your money and track the market over time alright guys if you got any value out of this video which i hope you did please make sure to drop a like on the video subscribe to my channel and tick the notification bell so that you can get notified whenever i drop a new video if you'd like some free stocks from any of these following brokerages weeble public or hood i have affiliate links in my description below so if you'd like to get some free stocks just check those out if you got this far i sincerely thank you for checking me out and thank you to all my patreon supporters i appreciate you guys being here i'm gonna finish this class of milk because it would be wasteful to to not finish it and enjoy so cheers i'll see you guys in the next video peace

Channel: Humphrey Yang

Views: 746,317

Keywords: humphreytalks, index funds 2021, best index funds for long term, investing for beginners 2021, stock market today, stock market crash, index fund investing for beginners, vanguard index funds for beginners in 2021, index fund investing 2021, investing for beginners robinhood, dividend investing vs index funds, investing 101 course, vfiax, vtsax, voo, vti, fnilx, fzrox, vqnpx, vtv, vanguard, fidelity, index funds, index fund investing strategy, top fidelity index funds, top index funds 2021

Id: EHhZyLuu1cU

Length: 12min 20sec (740 seconds)

Published: Mon Mar 08 2021

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