3 Reasons to Load Up on Index Funds in Your Retirement Plan | Business | #retirement | #elderly | #seniors
Index funds are designed to track different market indexes that already exist. An S&P 500 one, for example, will have the goal of matching the performance of the S&P index itself. If you choose to go this route, you can look at different funds’ performances since inception to get a sense of how well they’ve fared throughout the years — and then make your decision accordingly.
Another thing to keep in mind is that if you’re saving for retirement in a 401(k), you generally won’t even get the option to pick individual stocks. As such, index funds are an easy next-best choice.
2. You get immediate diversification
The money you sock away for your senior years is money you may need to get you through 20, 25, or 30 years of retirement — if not more. As such, banking on a handful of stocks to provide the growth you need isn’t the best bet. Rather, you’ll need a truly diverse mix in your portfolio to grow your balance and protect yourself from market downturns.
The great thing about index funds is that they offer that diversity right off the bat. Going back to our previous example, an S&P fund will effectively mean that you’re putting your money into 500 different companies. That’s a great way to branch out.