Index Funds

Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway, and worth about $103.8 billion. 

Don't take our advice about Index Funds, take his.

Warren wrote in his 1996 annual report "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals" 

John C. Bogle was the founder and chief executive of The Vanguard Group, and is credited with creating the first index fund. 

An avid investor and money manager himself, he preached investment over speculation, long-term patience over short-term action, and reducing broker fees as much as possible. He suggested - Don't look for the needle in the haystack. Just buy the haystack. 

With Vanguard, you could open an account to track all the companies listed in the S&P

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. Take a look at how the S&P have performed over the last 5 years.

Don't Speculate - Don't become a Day Trader

Warren Buffett has become so successful by understanding the value of the companies he has bought or sold. Gamblers who speculate may get lucky once or twice, but by investing in index funds, you can succeed by consistently taking advantage of the whole market, and compound interest. 

Researchers found that 3 percent of traders make money, with less than 1 percent making more than minimum wage.

Our Results

We choose the U.S. Equity Index Fund - Accumulation. This index fund has 3846 stocks listed, the table below shows where the majority of funds are allocated. The Fund seeks to track the performance of the Standard and Poor’s Total Market Index, comprising of large, mid, small and micro-sized company shares in the US. Although many stocks are included in the index fund, more investment is applied to the more successful companies through "capitalisation weighting".  

Tips for investors

1/. Forget Get Rich Fast strategies, Get Rich Slow, start early and invest a fixed amount regularly. Long term growth is helped by compound interest. 

2/. Never speculate or gamble

3/. Chose a tax free option such as an ISA Index Fund, a great way for UK residents to save or invest up to £20,000 tax-efficiently each year. Other countries have similar tax free allowances. You can create an ISA or tax free account within the Vanguard framework to invest in Index Funds.

4/. In the UK, an individual may sell their shares and apply a capital gains allowance - you don't pay tax on first £12,300 - see Capital Gains Allowance

5/. Benefit from low cost of charges. Ask your current pension provider how much they charge you for managing your pension - We were being charged £1420 per year (about $1962 or €1655) before switching to Vanguard.

6/. Choose an Index fund with low charges applied -  There’s an old Wall Street joke told when an investor loses money: “The broker made money and the brokerage firm made money – and two out of three ain’t bad.” The broker and the brokerage firm got their commissions or fees and made money, regardless of what the investor made or lost on the broker’s advice. 

Warren Buffett: Should you buy Index Funds at All-Time Highs?