Best Investment Strategy Over Time

Mickey | Financial Services | Thursday, December 16th, 2010

There are a billion and one ways to make money on the stock market.  But the best investment strategy that someone who can care less about trading the market is investing in index funds.  It has been touted as a good and sound strategy by investment experts like Warren Buffett and other prestigious financial advisors.

There is a simple reason for this.  Recent research is bringing to light the fact that most people actually don’t beat the market when they are investing and picking stocks on their own.  Not only that, research is also showing that it’s not just average people having a hard time beating the market.  Professional money managers, people who get paid big bucks to do this stuff, aren’t able to beat market gains over time.

That means you have a much better chance of making the most amount of money if you don’t try to beat the market at all.  The best investment strategy to do this without tons of headache or stress is to invest in index funds.

You see, index funds track the market gains in general.  There are three distinct advantages to this.

First of all, you don’t have to pick good stocks to invest in yourself.  Stock picking is a lot of work to begin with and in the end may not give you greater gains anyway.  These are known as passively managed funds, which means a computer picks the stocks based on the index that it is tracking.

Secondly, the fact that it is passively managed fund also makes it cheap.  One of the main reasons why index funds are one of the best investment strategies is because they don’t cost that much to invest in like other mutual funds.

Thirdly, the US stock market has proven itself to grow around 9-10% a year over time.  That means you can expect at least that much gain in your portfolio before your retirement when you need to start liquidating.

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