Know Nothing About the Stock Market? Here's the Easiest Way to Invest
Investing your money in stocks is one of the most effective ways to grow wealth. But what if you're clueless about the stock market? What if you have no idea how to evaluate companies and figure out which ones to buy? While there are resources available that can guide you through the process as a first-timer, there may be an easier way to put your money to work -- buy index funds.
Index funds are passively managed funds that aim to match the performance of the market indexes they're tied to. An S&P 500 index fund, for example, will have the goal of mimicking the performance of the S&P 500 itself.
By comparison, actively managed mutual funds don't aim to match different indexes; they try to outperform them. And with actively managed funds, professionals are hired (and paid handsomely, much of the time) to hand-pick investments. The result? Actively managed mutual funds charge higher fees than index funds. (Interestingly enough, though, they don't always outperform them.)
Source Fool.com
