Easy Stock Market Strategy for Young Investors

By: Vince Shorb
For young or inexperienced investors choosing a stock or mutual fund can be confusing. What's more unless you have professional training, investing in either stocks or mutual funds could be too risky. Fortunately, there is a simple investment you can make without having any experience in the stock market.

Importance of Investing Young. It is essential that you start investing young; if you don't your actually loosing money and missing out on the most important thing young investors have in their favor 'compounding interest'.

Each year that you have money and are not investing you're loosing about 3% of its value due to inflation. So after 10 year of sitting on $100 cash it could be worth less than $75. What's more, by investing young you benefit because the money you made from your investments - make you more money. Making money from money you've already earned from your investments is known as 'compounding interest'. This powerful force can make you a millionaire well before retirement age with saving as little as $70 per month.

Now that you know you need to invest; how do you start? The stock market offers a great place for young investors to get their money working for them; the good news is that you don't need to have a ton of money to start.

Plus, with the investment vehicle discussed in this article, you don't need to be a stock market expert to begin.

What's the solution? An ideal investment for young and inexperienced investors is to get on the road to financial independence are low-cost broad market index investments. Warren Buffet states, "A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money." Reduced risk, solid returns and it one of the simplest investments you could make. An added bonus is that it takes only minimal knowledge and about 60 minutes to start getting your money working for you.

What's a broad market index? A broad market index is a group of stocks that you can purchase as one. It allows young investors to buy a collection of top performing stocks that mimic the performance of the entire stock market. Since these index funds allow you to earn returns similar to the overall performance of the market it greatly reduces the risk. This is an advantage to the beginning investor since it is safer than investing in a single stock or some mutual funds; plus there is a history of double digit returns.

Broad based index investments may not sound like something you know; however if you ever watch the news chances are you have heard of this investment. -The Dow Jones Industrial Average index contains 30 top industrial stocks. -The Standard & Poor's 500 contains 500 of a variety of different stocks. -The NASDAQ 100 contains 100 stocks that are mostly in the financial and technology sector.

When you invest in a broad based market index you actually own a small piece of each individual stock. For instance, when you invest in the S&P 500 broad market index, you're buying a piece of all 500 stocks in that index. So for each S&P index share that you own your actually own 1/500th of companies like: American Express, Google, Ford, Nordstrom, Home Depot, Staples and Yahoo to name a few.

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