As I have said several times in this segment, in retirement, you cannot have all income-producing investments. You have to have some in a long-term growth investment. Something that will be there for you 10, 20, even 30 years down the road.
And one of the best places for that long-term piece of money is index funds. They are one of the simplest investments to understand and have consistently finished in the top 20% of all mutual funds.
An index fund or ETF is one that mimics an index. I told you they were simple.
[ad#Google Adsense 336×280-IA]It can mimic the S&P 500 or 100 indexes, the Nasdaq or even the Dow Jones Industrials.
The idea is to capture the return of the broad indexes, which they do.
And they offer some great benefits that you won’t get from traditional mutual funds or a stock portfolio to any class of investor looking for growth.
They fit the best qualifier for retired persons: they are boring.
No excitement, no thrill ride. Just long-term growth of your money.
They have the lowest expenses because they don’t have the same number of trades each year that a traditional mutual fund does. They own the stocks in the index and that’s it.
Best yet, there is no chance you could lose all your money. That is something very few investments can claim. The 500 stocks in the S&P 500 are not all going to go broke, ever. In fact, in my 30 years in stocks, not one has, ever.
Index funds are much more predictable. They have decades of performance data on which to base performance estimates, and that makes them perfect for retirement. No surprises!
There is no stock-picking risk in an index fund, either. The fund simply owns the stocks in the index and that’s it. No stock-picking geniuses required.
But maybe the best reason to own an index fund is the fact that no broker or salesman will call you to buy anything else. When they see you own an index fund, believe me, they won’t bother you, ever.
And Warren Buffett recently told his heirs after he’s gone to put their money in a broad S&P index fund with low expenses with Vanguard.
A recommendation doesn’t get any better than that.
Don’t wake up broke in your 80s. You have to put something aside for the future.
— Steve McDonald
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Source: Wealthy Retirement