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Articles
I
Love iShares
by Jason Kelly
11/27/2001
I've
long been a fan of index investing and my upcoming book The
Neatest Little Guide to Do-It-Yourself Investing explains
why in humorous detail.
It used
to be that in order to tap indexes you needed to invest in
an index fund. For years that meant the S&P 500 fund at
Vanguard. It's still a super fund has proven founder John
Bogle correct many times over that you can't get ahead betting
on active management.
Just
look at what's happened since the market swapped its bull
horns for bear teeth. All those runaway gains melted in months.
I'm no innocent, either. I'm a diehard tech investor and the
dying has never been harder than in the past 18 months or
so. Some stocks are down 98 percent. None that I own, thank
goodness, but some that are close enough to make me feel the
sucking swirl of their sinking prices.
All
of which has been a great kick in the pants for me to review
the benefits of indexing. In brief:
- Immediate
diversification across a broad market.
- Low
costs.
- Never
underperform the market.
- Low
stress because there is nothing to do but send money
every month.
The question
becomes, What's the best way to index? Then, Which index should
I own? My favorite approach is to buy iShares
from Barclays. They're exchange-traded funds (ETFs) so you
treat them like regular stocks. The expenses are super low,
just 0.09 percent in the S&P 500 fund.
Best
of all, they cover a wide variety of indexes. Naturally, you
can buy the usual suspects of the S&P 500, Russell 2000,
Dow, and so on, but you can also get less popular indexes
like the S&P Mid Cap 400, S&P Small Cap 600, MSCI
Mexico, and indexes from Goldman Sachs and Cohen & Steers.
All of
which can become confusing as it seems that you're right back
to choosing where to put your money. Don't sweat it. I suggest
a balance between the S&P 500 and the S&P Mid Cap
400. Send more money every month and stop watching the markets.
You'll eventually be rich and you'll never know what happened
along the way.
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