There’s a lot of information folks are talking about and encouraging to invest in index funds and ETFs. These are considered as pooled investment vehicles. In other words, these are investment vehicles where you can invest in multiple equities simultaneously instead of having to invest in each individual equity. As an example, if you wanted to invest in the S&P 500, which is the largest 500 companies on the US stock exchange, you could buy shares for each of the 500 companies individually. This sounds like a lot of work. What Index funds and ETFs allow you to do is invest, in this example, in the S&P 500 buy either buying an index fund or ETF that tracks the S&P 500.

What’s the difference between the two?

• ETFs are traded like a stock and you can trade it throughout the day. Index funds get traded once per day after the market closes.
• ETFs typically does not require a minimum amount to start investing in them. Index funds often have a minimal requirement that you have to initially fund.
• Both ETFs and index funds can have a management fee cost to it. You are essentially having someone else manage a group of equities instead of yourself and this comes at a cost.

I primarily invest in all individual stocks and manage them myself. This can get a little cumbersome at times. Imagine having over 20 individual stocks that you want to manage across multiple accounts such as an IRA, Roth IRA, and after-tax accounts. That’s quite the work.

If you are interested in investing in certain sectors or investment categories, ETFs and index funds can help investing easier. For example, if you are interested in investing in international equities there are international ETFs and index funds. If you are interested in Dividend, specific sector, or market-caps, ETFs or index funds are there to help invest in them.

Both Schwab and Vanguard have ETFs and Index Funds that are being talked about and that their past performance have been promising. Make sure to do your own research before investing. I will be looking into more ETFs and Index Funds and potentially considering an investment strategy with them. If you are interested in following my journey and their journey, follow them on Instagram and email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.