For those of you trying to ramp up your long-term savings plans, Index Funds and ETF’s offer two great alternatives to CD’s and savings accounts … and a MUCH better alternative than typical Mutual Funds (due to lower costs and similar or even better results).
But, don’t kid yourself, these are savings plans, not Investment plans (there is a difference) …
But, if you are committed to saving rather than investing, you have CHOICES.
Specifically, you can now choose between two very low cost options: Vanguard Index Fund (or similar) or ‘Spider’ ETF (or similar).
An ETF is an exchange traded fund … a specific example is the Spider ETF, which matches the S&P 500 in much the same way that the Vanguard 500 does.However, in the end, they’re still not the best deal, as pointed out by this Forbes article.
The Simple Dollar post also talks about what to do while you are saving for your entry fee (unlike a bank, you can’t just plonk down $50 every time you want to buy a few shares in the fund) ….
…. if you are in serious saving mode, why don’t you take a read?
But, why Index Funds or whole-of-market ETF’s in the first place, why not mutual funds?
For answers to these questions, I usually try and go straight to the ‘top’ …
… to the greatest expert in that field that I can find. And, in the field of stock investing there is no better advice than that given by the World’s Greatest Investor himself, Warren Buffet, who once said:
The “know-nothing investor” should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. [W. E. Buffett – 1993]
Who would argue with the World’s Richest Man?
Important Note: 7million7dollars does NOT currently invest in any Index Funds, Mutual Funds, or other “Packaged Investment Products” … apparently, he is just a (rich) product of the Stone Age 😉