© 2015 Shmoop University, Inc. All rights reserved.
Financial Literacy

Financial Literacy

Home Finance Investing Buying Index Funds

Buying Index Funds

Buying an index fund is a little like a zen kōan.

Kōans are simple questions (like "what's the sound of one hand clapping?") that are intended to incite doubt and show a student how little he/she knows.

On the surface, index funds are really simple: set up an account at E*Trade, Vanguard, Fidelity, Schwab, or any place offering index funds; deposit a few grand into the account; click on the fund you want.

But, of course, the whole thing is a little more complex.

First, you have to figure out what kind of index fund you want. Is there an index you want your fund to be measured against? Do you want an index fund or an ETF (Exchange Traded Fund)? How much do you want to invest? Are you going for domestic or international funds? Do you want a fund linked to a specific market (like tech)? What sound does a tree make when it falls in the forest and no one is around to hear it?

One thing you will need to accept (just like those zen students) is that you don't know everything about investing. One of the best reasons to invest in index funds, actually, is because you don't know that much but want to invest—and you want someone else to decide which investments might make the most sense. Once you accept that you don't know everything, you can learn enough about index funds to decide which ones you want.

How very zen of you.

People who Shmooped this also Shmooped...

Noodle's College Search