Vanguard Index Funds (Investing For Beginners)

hey everybody welcome back to whiteboard finance my name is Marco and I'm here to help you master your money and build your wealth in today's video we're gonna talk about Vanguard index funds for beginners or people that are looking to get into index fund investing so in this video we're going to talk about what index funds are who index funds are for why Vanguard in the first place and also why invest in index funds at all so without further ado let's get right into the video so what are Vanguard index funds so Vanguard index funds are a type of mutual fund where investors pull their money together to buy shares in a fund that mimics a certain benchmark so the best example I can give you is here's a bunch of investors there's a Sally the salon owner Barry the basketball coach you have Marco in front of the whiteboard and then you have Christina the nurse for example so these are all just regular people and they're putting in their money into this index fund and pulling it together okay so what is this index fund so this is going to be the actual index fund that they're investing in so these index funds are designed to mimic a benchmark okay so what is a benchmark what can a benchmark be so the benchmark is an index or an industry such as the S&P 500 it can be real estate for example it can be growth stocks whatever there's about sixty two different Vanguard index funds out there and they cover a whole different type bunch of different types of investments so index funds contain hundreds if not thousands of stocks within one share of that index fund so instead of Christina the nurse going out on her own and investing one stock in Amazon one stock in Google we'll just call it alphabet Google so everyone knows what I'm talking about Netflix for example these are all individual stocks it's all somewhat risky so instead of worrying about individual stocks Christina goes on Vanguard's website and says hey you know it looks like this index fund is investing in the total stock market if I buy one share of this index fund I have exposure to the entire stock market so why not just do that so this is basically instead of hand picking individual stocks and bonds the fund manager for these indexes are basically buying all the stocks and the index or the benchmark that it tracks okay so here's a couple examples I don't lose you so the one that covers the entire stock market that I was talking about with Christina is called V T Sachs that's an actual real Vanguard index fund and this literally covers the entire stock market okay so if you invest in V T sex you have exposure to the entire market say for example Marko in front of the whiteboard is interested in real estate well they do have a REIT tracker or a REIT index which is known as VG s IX v g6 and this basically is a benchmark that tracks all of the real estate investment trusts out there that are publicly available okay so there are some minimum investments with Vanguard index funds for example v g6 the minimum investment is $3,000 for V T Sachs the minimum investment is $10,000 so if you want to get into an ETF which is outside the scope of this video and ETF is just an exchange-traded fund that tracks pretty much the same thing as these you can get in for a much lower dollar amount okay you can actually get in with one share if you do want to buy fractional shares or if you want to invest you can always do so with betterment and m1 finance the links are in the description below if you want to get started in investing with that or you can even use Vanguard themselves okay so let's move on here who are these index funds for so all these people here that are investing they're all just regular people I'm actually not going to race this just yet because this is a good example so these are for people looking to passively invest okay and they're just looking to match market returns instead of trying to beat them so Christina the nurse Marco in front of the white board Barry the basketball coach all these people lead their own lives they're busy they have kids they have you know 8 to 5 jobs you know they're working they want to enjoy their life they don't have time to burn the midnight oil and look at overall the annual reports to find outliers of individual stocks to outperform the market picking individual stocks is very difficult very hard to do so what they're doing is is that they're pooling their money together having a passively managed fund like VG six or VT Sachs for example and getting on with their lives okay so there was actually a 2013 survey done or study done that shows that index investing outperformed active investing by eighty to ninety percent of the time and with when you encounter basically expense ratios and how much it costs to actually be invested in a actively managed mutual fund a lot of those returns were diminished in the first place okay so why Vanguard why even invest in Vanguard index funds when there's Charles Schwab index funds there's a bunch of different other companies that offer index funds to invest in but excuse me I'm still under the weather from fincon I don't know what was in that plane but you know maybe I partied a little bit too hard but I'm out here I'm out here for the people battling okay so if I sound out of them under the weather I am so Vanguard is essentially the 800-pound gorilla in the room and they're the originator of the index fund which came out in 1976 so our IP to Jack Bogle the creator of Vanguard and the index fund as we know it today the nice thing about Vanguard is that they have low expense ratios so their expense ratios pretty much how much it costs you to invest in these funds compared to their competitors is 73% lower than the industry average so this is not a sponsored video by Vanguard I am a vanguard customer I've been investing with them for a very long time that's actually where my entire Roth IRA lives today and I'm just someone who's a proponent of the brand this is not paid at all so 84% of their mutual funds have performed better than their peers over the last 10 years as well so you know that you're getting a good product and there's actually over three trillion dollars invested in Vanguard mutual funds and ETFs at the time of this recording that's a lot of money you guys so I don't think they're going anywhere is the point of that comment and then finally you have a big selection with Vanguard from their ETF their index funds as I mentioned earlier in the video you have about 62 index funds to choose from which will pretty much say she ate any app the for your investment in risk profile so finally why even invest in index funds in general not necessarily with Vanguard not necessarily with Schwab or you know whoever else just why index funds in general well first of all active investing is time-consuming and difficult going back to our example of bury the basketball coach and Christina the nurse they have they are working my my wife who is a nurse works 12-hour shifts the last thing she's gonna do is come home cook dinner and start looking at 10k annual reports and all that stuff to invest into an individual company it's it's a time-consuming and it's difficult so that's why index fund investing is actually easier and then also its low-cost as I just mentioned so the ratio the expense ratios are very low compared to actively managed portfolios and you don't require a portfolio manager for these there is a fund manager that updates the selections quarterly or annually or biannually and they do it because it's easy because they're just following that index they're not actively sitting there you know trying to get paid off of their research for layman's terms finally index funds are diversified as I mentioned here say for example we're looking at VG 6 or VT sex you're getting hundreds if not thousands of shares of stocks within one share of an index fund and you have a basket full of different stocks as opposed to having a thousand shares of Amazon or a thousand shares of Netflix well guess what if Netflix goes by the wayside you're screwed there goes your whole investment so index funds they're also consistent they've performed consistently especially over the last 10-15 years a lot of these index funds they're about ten fifteen years old and they've done well however you know we've been in a ten-year bull market right now which is you know anyone could have been making money in this market so take that with a grain of salt you guys as always I hope you guys got value out of this video it takes a lot of time and effort to outline these videos and record them so I would appreciate it if you shared it with one friend and as always you guys please give the video a thumbs up and subscribe if you haven't already thank you and have a prosperous day [Music]

Channel: Marko - WhiteBoard Finance

Views: 244,760

Rating: 4.9680104 out of 5

Keywords: vanguard index funds, vanguard index funds for beginners, vanguard index funds explained, vanguard index funds 101, investing for beginners, investing for beginners with little money, index funds vanguard, investing in index funds, best vanguard index funds, vanguard etf, index funds, how to buy an index fund, vanguard index fund

Id: vDz_OAU_uq4

Length: 8min 58sec (538 seconds)

Published: Wed Sep 11 2019