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[quote=Anonymous][quote=Anonymous]15 51 please explain do a financial dummy like me what an index fund is and how it throws off that kind of interest.   [/quote]

The individual stocks in the stock market go up and down. Some increase in price, some decrease. Betting on 1 stock or a group of stocks is usually a best guess or a gamble completely. The mutual fund that your local financial advisor raves about, is just a collection of stocks. The magic of the stock market though, is if you take ALL the stocks together at once, they are always increasing slowly. Since the stock market existed, the annual increase in the stock market has averaged around 7%, this is including wares, financial meltdowns, depression era, etc,. Some years are more, some are less.

So basically when you invest in an index fund, instead of picking a stock or a group of stocks, you're just investing in the ENTIRE market, which is a lot more stable. Even during a stock market drop, you come out on top, because while it drops you're buying a lot more shares for the same price, and when the market recovers (as it always does), those extra shares you bought at a low price are now increasing rapidly again.

I would highly recommend looking up index fund investing, as there are people out there that can explain it much better than I can, as well as outline who's best to invest with, why you want to keep your annual fees low (less than 1%), how to properly proportion your money, and how to lock it into either a Roth IRA or 401K.[/quote]

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