15 Reasons Index Funds Are My All Time Favorite Investement

Transcript:

On this episode of the Personal Finance Podcast, we're going to talk about all the reasons I love index funds and ETFs.

What's up everybody? And welcome to the Personal Finance podcast. I'm your host, Andrew, founder of Master money.co. And today on the Personal Finance podcast, we're going to talk about all the reasons I love index funds and ETS. If you guys have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co and follow us on Spotify, Apple podcasts or whatever podcast player you love listening to this podcast too.

And if you want to help out the show, leave a 5 star rating and review on Apple Podcast or Spotify. Now, today is a huge day here at Master Money because Index Fund Pro is live. And if you don't know what Index Fund Pro is, this is our flagship course on how to invest your dollars, how to invest in index funds and ETFs.

And we're so incredibly excited to release Index Fund Pro to you guys so that you guys have access to it as well. And today on the podcast, I'm going to give you a discount code for Index Fund Pro. In addition, I'm going to give you a little bit of information on it. And then we're going to go into why I love index funds and ETFs, why it's my favorite strategy to invest my dollars, and why some of the best investors in the world invest their money this same exact way.

Now Index Fund Pro has over 30 videos of lessons teaching you how to invest your dollars. And what I want you to get out of this course is that you're going to get clarity, meaning you're going to get a full plan for you to be able to invest your dollars. You're going to see how compound interest is going to absolutely change your life. We go through so many different examples in this course on how compound interest will change your life and how even small amounts of money invested overtime can grow to very large amounts of money.

The cool thing about investing overtime is that you don't need a ton of money to invest to become a millionaire. You can invest small amounts of money, they can grow to millions of dollars and we talk about that in Index Fund Pro as well. We're going to go through Investing 101. So if you have no idea how to invest your money, if you've never invested before in your life, we have a section called Investing 101 that will walk you through that.

What is a stock? What is a bond? All of these different pieces. I'm going to teach you how to automate your money. You need to automate your money to take your willpower out of the equation. I'm going to show you how to automate your investments so you don't have to think about them anymore. This is a set it and forget IT system where index funds are something you can index and chill.

You don't have to just sit there and think about stocks all the time and worry about other things. You can worry about increasing your income so you can invest more dollars. You can worry about your family or spending time with the ones that you love. Automating your investments is one of the most powerful things that you can do. In addition, I'm going to show you how to find your retirement number.

How much money do you need to have invested so that you can retire? Index fund pro, We've got that for you as well. And if you want to retire early, all you have to do is be able to hit that number. We're going to talk about financial independence and how to retire early with index funds and ETFs. I'm going to give you the Investors Checklist.

The Investors Checklist walks you through the process of exactly what to do when you want to invest your dollars so that you know what to invest in and in one order. This is going to give you the exact order of operations so that you know how to invest your dollars. The investors checklist is included in Index fund Pro.

I'm going to show you how to diversify your portfolio so that you can be well diversified for the future and weather some of those storms that are going to be ahead because we all know when you invest your dollars, recessions are expected, but that's just a short term problem. Over the long term, the market goes in One Direction historically and that has been up.

I want to inspire you. I'm going to give you a bunch of different motivating factors to show you that investing your dollars is going to give you free freedom, financial freedom with your time, your energy, so you can spend your time doing what you love every single day. And that's what we want you to do here with Index Fund Pro. I'm going to show you how to reduce your tax liability when it comes to investing.

Index Fund Pro is going to walk you through that, how to reduce your tax liability when you invest your dollar so you don't have to give so much money to Uncle Sam so that you don't have to pay so much money in taxes. I'm going to show you why investing makes you wealthy. So if you're still on the fence, if investing is even legit, I'm going to show you why you should be investing because it's going to create freedom for your life.

And I'm going to take you step by step on how to buy index funds and ETFs. If you're confused on what you need to be doing, I'm going to share my screen with you and you're going to see step by step how to buy index funds and ETFs. In addition, we're going to give you some bonuses like the master money investment calculator, index fund pro members.

We're going to get access to this. First, you hear me do all these calculations on the podcast. How do I do those calculations? We're using the master money investment calculator now and the master money investment calculator. I took all the best calculators out there and I combine them into one and set it up exactly how we talked about it on this podcast.

So I'm really incredibly excited for everybody in Index Fund Pro to have access to that as well. In addition, if you sign up with the promo code, you're going to get 30% off this first week. So the first seven days you can get 30% off of Index Fund Pro just by using this promo code.

We're not going to have a sale like this ever again. This is going to be the lowest I'm ever going to mark down Index Fund Pro. So if you want 30% off of Index Fund Pro, you can get it in the first week and that's it. So this first seven days you can get 30% off by utilizing the promo code.

And the promo code is index fund 30. Index fund 30, all capital letters is the promo code to get 30% off Index Fund Pro. Well, how much is Index Fund Pro? We wanted to make this affordable for you guys. It's $99.00 for Index Fund Pro, $99.00 for you to be able to learn how to invest for the rest of your life.

You can set this system up and for the rest of your life you have an automated system into place. Now this is obviously for education purposes. My entire goal with Index Fund Pro is to educate you so that you can make an educated decision on what the best investments are for your exact situation.

So that's what Index Fund Pro is there to do. In addition, in the first seven days, if you use that promo code, you will be entered to win a one-on-one coaching session with me. We're going to give a couple of these away where I'm going to give you an hour of my time. You're going to meet with me on a Zoom call an hour of my time, and we're going to meet one-on-one and we're going to look at your personal financial situation and I'll answer any questions that you want in that one-on-one session as well.

So I'm so incredibly excited for this. There's seven sections. There's 30 plus video lessons as well in Index Fund Pro and we go through all of these different pieces and you're going to get a lot of bonuses. In addition, we're going to be adding content constantly to Index Fund Pro and there's a bunch of different ideas that we have from diving into specific index funds and analyzing those to investing for your kids and all of these other things that we will be adding to Index Fund Pro as well.

In addition, if you're an international investor, we are looking to add some international content as well, especially if you're a Canadian investor, if you're in the UK, if you're in Europe, Canadian investors, European investors. We're looking to have international content on Index Fund Pro as well in the future.

So stay tuned for that. But we are so incredibly excited for you to check out Index Fund Pro. Make sure you use those promos codes. We will link it up down in the show notes below as well because we want everybody to have access to this. And like I said, this is the cheapest we will ever make it. This is the cheapest Index Fund Pro will ever be.

It goes back to $99.00 in seven days. So if you're listening to this in the future, it's going to be probably at full price, but the value is there. We made this so incredibly valuable for the price most people would charge 3-4, five, $600.00 for this course. I wanted everybody to have access to this because what's our goal here at the Personal Finance podcast?

To teach as many people as possible to build wealth. Now today we're going to be getting into why I love index funds and ETFs. Some of the amazing reasons why these are some of the best investments out there and why even the best investors in the world are putting their own money into index funds and ETFs.

So I'm really excited to get into this. We're going to go through a bunch of these. Without further ado, let's get into it. So #1 is that index funds have historically outperformed professional investors. So this is one of the most amazing stats that are out there.

And we still talk through this all the time. Professional investors try to beat the index. So if you don't know what an index fund is, let's talk through that first. What an index fund is. It's an investment that just tracks an index. So there's a bunch of indexes out there. One popular 1 you may have heard of that we talk about all the time is something called the S&P 500.

And what is the S&P 500? It is the 500 largest companies in the US. There's actually a little more than 500 in it now, but it's the 500 largest companies in the US. And the amazing thing about the S&P 500 is that if a company's not performing well and it drops out of the S&P 500, they bring in the next biggest company that is performing well.

So your portfolio is always has the best companies in it in the US. This is one of the most powerful things that you can think about here, because as you start to invest in stocks and bonds and all these other things, it'd be very hard to invest in 500 companies at one time. So what an index fund does is technically an index mutual fund, and it just tracks the index.

All it does is track the index. That's all its goal is to do, which makes this very predictable. And it also makes it something that is an investment over time that we can look at history and see what it has returned. So historically, an index fund like the S&P 500, for example, is what professional investors are trying to outperform.

Now, professional investors are folks on Wall Street, for example, who are trying to beat the market when they say beat the market, they're trying to beat index funds, the S&P 500. And so that is their benchmark is to try to beat index funds. And 90% of the time, 90% of those professional investors do not beat index funds year in and year out.

But guess what? Of the 10% that do, they are not the same year in and year out. This is absolutely amazing because what that means is no professional investors actually beat index funds for a long period of time. 0 do. And This is why it is so incredibly powerful for us as non professional investors.

If you're a non professional investor, why do you think that you can beat professional investors instead? The best way to beat the market is to become the market. And that's why we invest in index funds. Funds and ETFs #2 index funds have extremely low costs. So if you're new to investing, investing fees will absolutely destroy your wealth building ability.

Even a 1% fee, which I know does not sound like a lot, a 1% fee can cost you 6 figures over a 30 year investment career. And we have an episode talking about this. We talk about how powerful it is to make sure that your fees are reduced because you could be costing yourself $100,000 all the way up to millions of dollars depending on how much money you're investing.

Index funds have some of the lowest cost out there and there are even index funds out there like Fidelity's index funds who have 0% fees. This is absolutely amazing. In addition, ETFs are the same exact way. Their fees are extremely low and ETFs work the same way as an index fund.

It is just called an exchange traded fund. And what an ETF is, is it's very similar to an index fund. It just mirrors the index. It copies the index, but at the same time, an ETF trades like a stock, so you can get out of in and out of it very quickly. I absolutely love ETFs and I love index funds. We invest in both and it's an amazing way to build wealth over time.

But you need to make sure that your fees are low and index funds and ETFs allow you to do that so that you can keep the majority of your money and keep that invested instead of giving it to some fund manager. The last thing you want to do is give your money away to some fund manager who is going to underperform the index fund anyways.

So This is why we talked through this as well #3 index funds have passive management, which this helps keep your fees low. So because index funds, all they do is just track the index. They don't have to have all these fancy fund managers in place and a whole team of stock investment advisors who are looking at some of these investments and picking and choosing stocks instead.

They can have small teams so that all they have to do is just mirror the index. They have one goal, mirror the index that they are tracking. That is it. That is all they want to do and it is really, really cool. That's why your fees are lower. It reduces your fees because they do that.

Number four, and This is why we haven't talked about a lot, is index funds typically have lower taxes than traditional mutual funds. So let's go through this for example. So you have short term capital gains and you have long term capital gains. Now we've talked about investment taxes a little bit on this podcast as well.

We have an episode where we talk pretty deeply on it. But short term capital gains, you're going to pay much higher tax rates than long term capital gains. What does short term capital gains entail? That means if you own a stock for less than a year and you buy it and then you sell it, you're going to pay short term capital gains.

This is why day traders play really high taxes. But if you have long term capital gains, meaning you held a stock for a year or longer, you're going to pay way less taxes and long term capital gains. So depending on your tax rate, if you're paying short term capital gains, most people are gonna pay anywhere from 10% all the way up to 37%.

But the majority of Americans are gonna pay between 22 and 37%, somewhere in that range for long term capital gains. If you make under $40,000, you're gonna pay 0% capital gains tax. And then the majority of Americans are only gonna pay 15% capital gains tax.

And then if you're a really, really high earner over a half, $1,000,000, then you're gonna pay 20% capital gains tax. So as you think through this, index funds are long term investments. So thinking through those capital gains taxes, you're going to see why this is going to be reduced in a second because index funds have low turnover.

So a lot of mutual funds, they buy and sell stocks all the time. They're constantly buying and selling stocks 'cause they're trying to beat the market. Index funds are not constantly having high turnover. Instead, they're just mirroring the index. So if say for example, you have an S&P 500 index fund, if one company drops out and another company comes in, then that's all they're doing is that turnover.

But they're not buying dozens of companies and selling dozens of companies a year. Instead, what they're doing is just mirroring that index, which reduces your taxes over time. The same thing with ETFs. Lastly, index funds have fewer dividends than traditional mutual funds. Unless you're buying an index fund that tracks really high dividend stocks are going to have fewer dividends than traditional mutual funds, which is also reducing your tax rate as well #5 is index funds require little financial knowledge, so you don't have to know about every single stock and every single bond and how to read quarterly reports and all those different things.

Index investing is relatively easy compared to building some sort of portfolio with a bunch of different stocks because you have to understand a bunch of different market sectors. You have to understand how each company operates. If you want to invest the wise way or when you invest in index funds, you just buy the index and you know what that is meant to do.

It is to track the index. Number six is convenience. If you wanted to own hundreds and hundreds of different stocks, you would have to do so much work to be able to do that. Index funds, you can buy hundreds of stocks all in one trade. All you do is buy the index fund and you can have your hands on hundreds if not thousands of stocks.

So for example, if you buy AS and P500 index fund, you're buying 500 companies all in one trade. If you buy a total stock market index fund, one of my favorites as well, then you're buying thousands of companies. Every company in the entire U.S. stock market, you're buying in one trade. You cannot do this individually.

If you're trying to do this individually, it is a very difficult thing to do. So this is high convenience when it comes to index funds and ETFs. Another amazing reason why we love index funds and ETFs. Number 7, and this is a big one, if you are new to investing, you've probably heard people talk about this, is you want to diversify your portfolio, meaning you want to have all different types of companies and different sectors so that if one company is struggling, the rest of the companies still maintain your portfolio and bring it up.

But here's the amazing thing about index funds as they are just tracking the index. So like we talked about earlier in the S&P 500, if one company is not doing well and it has to drop out of the S&P 500, they're going to bring in the next company and your portfolio returns will be virtually exactly the same because they're just bringing in a better company into the S&P 500.

Whereas if you were owning a stock, let's say you own 10 stocks, for example, and one of them just tanks it has some financial fraud or something along those lines happened. Well, that means 10% of your portfolio would be going down during that time. Well, index funds aren't like that. They'll just drop the company and bring in the better company depending on what the S&P 500 holds.

So this is where you have this diversification in place that is absolutely amazing. And another example would be I love to buy the total stock market index fund. I love Vanguard's total stock market index fund. There's a bunch of other ones out there. They all track the total stock market and So what you're looking at here is you're buying every company in the US So all these companies have a bunch of international work that they do.

So you get international diversification. You get diversification within small industries, large industries, emerging markets, international industries. There's so many cool things that you get just by buying one fund. It's completely diversified. You get thousands of different companies all in one trade.

And that is the amazing thing about index funds as well. The next one is index funds are transparent. What do I mean by that? What do I you mean by index funds are transparent? You know exactly what the goal of an index fund is? It is to track the index. If you buy a mutual fund, really their goal is to beat the index.

But outside of that, you don't know what stocks and bonds they're actually going to buy. With an index fund, you know what they're doing, They're just tracking the index. You know exactly what is going on. And that is another amazing thing about index funds is they are completely transparent. The next one is index funds offer a high degree of liquidity.

So if you don't know what liquidity is, it's how fast can you get ahold of your money if you want to sell something. And index funds and ETFs have a high degree of liquidity outside of other types of investments. Say for example, you buy a rental property, it's going to be very hard to get your cash out quickly. You got to put it on the market, you got to hire an agent, all those different things.

Well, index funds and ETFs offer very high degrees of liquidity. And if you want the most liquidity, ETFs offer the fastest liquidity because ETFs actually trade like a stock. So you can get your money out of an ETF very, very quickly within a, you know, a couple of minutes usually.

So if you're worried about liquidity or being having access to your cash, then index funds and ETFs are amazing. And ETFs are an even better option in that situation. If it's something that you want #10 index funds are amazing for long term investors. Index funds are not something you trade in and out of all the time.

There's something for long term investors who are willing to ride out the market in the UPS and the downs. You're going to have up years that are gonna be absolutely amazing like we've had in the last 10 years. We're gonna have down years like we had here in 2022 where the market went down for that year. This is very normal, by the way.

If you're new to investing, the market goes down, the market goes up. So you may start investing, for example, and the market goes down. The key is to not panic, because if you look at a stock market chart over a long period of time, take out your phone and put your stock market chart to the longest time horizon that there is and what direction does that market go?

It goes in One Direction and that is up. And this is one of the most reassuring things. So if you're a long term investor, you're investing in that stock market going up for a long period of time. If you're buying something like an S&P 500 or a total stock market index fund, those types of investments are buying a total stock market.

So index funds are amazing for long term investors. And we here at Master Money and the Personal Finance Podcast, we focus on investing for the long term, whether it's real estate or whether it's buying stocks or businesses or anything along those lines. There's no day trading involved here whatsoever #11 is index funds can be set it and forget it.

I look at my index funds maybe once a year and the only reason why I'm looking at them is to pull my tax forms. Usually this is a set it and forget IT system where you can start investing your dollars so that over time, time this can grow and you don't know how to think about it. You can focus your time on the things that actually matter like your family, your career, so that you can earn more money and invest more dollars as well.

So in Index Fund Pro, we teach you how to set it and forget it with index funds so that you can build that wealth over time #12 and this is one of my favorite reasons is the best investors in the world invest their money in index fund. In fact, if you've been listening to this podcast for any amount of time at all, you know, I talk about Warren Buffett all the time.

I think Warren Buffett is the best investor of all time. I think is. Track record shows that and here's just a few quotes from Warren Buffett about index fund. He puts his own families dollars into index fund and an index fund pro. I show you his portfolio and how he actually invests his money as well, which is really cool because you can see exactly how Warren Buffett invests his families money, which is billions and billions of dollars.

So here's a quote by Warren Buffett. When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not to the clients. Both large and small investors should stick with low cost index funds. That's Warren Buffett's direct quote.

Another one. The 21st century will witness further gains almost certain to be substantial. The goal of the non professional should be to pick winners. Neither he nor his helpers can do that, but should rather be to own a cross section of businesses that in the aggregate are bound to do well.

A low cost S&P 500 index fund will achieve this goal. Here's another one by Warren Buffett. By periodically investing in an index fund, for example, the Know Nothing investor can actually outperform most investment professionals. Paradox, I mean, over and over again you could see Warren Buffett talking about this and This is why he puts his money where his mouth is and invests in index funds in all of his family's money, in his wife's funds and his kids funds.

All of these different things are in index funds. This is absolutely amazing and there are so many other amazing investors out there who say the same exact thing. We had Brian Ferraldi on this podcast who he invests in individual stocks, but he said even for me, I invest in individual stocks, but 99% of investors should be investing in low cost index funds.

And you can hear that episode with Brian Ferraldi. We'll link it up down below as well #13 With index funds, it is easy to select an asset allocation. So an asset allocation is what percentage of stocks and bonds do you have, for example? So with index funds, we go through this in Index Fund Pro, how to select your asset allocation, how much stocks, how much bonds, Maybe we want some international funds, how to put together A3 fund portfolio.

There's a bunch of different things that we talked about in Index Fund Pro, but it is easy to select an asset allocation with index funds, meaning you can just pick and select just a select few and be able to really have success with investing your dollars #14 you don't need a bunch of different funds to be able to be successful, just like we're talking about here.

In fact, you can read the book The Simple Path to Wealth and JL Collins owns one index fund. Or you can read other portfolios like Bogleheads, for example, and they have a three fund portfolio. And we talked through all this in the course as well. Or you can see other people who have maybe four or five index funds. You don't need to own a ton.

In fact, one to five is the perfect amount. I think anything about 5:00 and you're just complicating your portfolio in my personal opinion. So index funds are absolutely an amazing way to just simplify your investing life. And simplification is the number one thing you want to do with your money, especially if you want to be successful with money.

Simplify and focus. Those are the two things that you want to be doing. And then #15 it is easier to make investment decisions because you're not buying so many stocks and bonds. You're just automatically investing your dollars into these low cost index funds. It is so much easier to make investment decisions and we take the guesswork out of it in Index Fund Pro so that you can learn what is going to be best for your personal situation.

So listen, there are so many pros to index fund investing. There were so many pros to investing in ETFs as well that it is where I put the majority of my money. This is how I became a millionaire is investing in index funds and ETFs. That's why I'm so passionate about this and I want you guys to learn exactly how we did this as well.

So we walk you through all of this in Index Fund Pro. Like I said, we made it as affordable as possible $99.00 and I want to make sure that you guys can get that discount code as well. So make sure you use that discount code at checkout if you want 30% off. Now listen, if you guys have any questions about Index Fund Pro at all or any questions about this episode, make sure you message me on Instagram or TikTok so that we can answer any questions that you possibly have.

I'm so incredibly excited for you guys to be able to check out this course. Thank you so much for listening to this episode. I hope you learned a ton about this episode. And if you enjoyed this episode, you can share it with a friend. And don't forget to leave a five star rating and review on your podcast player as well. I truly appreciate that we read every single one of them, and I cannot thank you guys enough for leaving those five star rating and reviews as well.

I truly appreciate each and every one of you guys and we will see you on the next episode.