Looking for a quick way to diversify your investments? Invest in index funds! Index funds are mutual funds that are designed to match the performance of an index in a specific market. Most funds try to do better than the index, but index funds try to match the performance of the index.
Here are two examples of Vanguard index funds:
500-index fund– Included in this fund are several different sectors – Energy, Health Care, Industrials, Utilities and others. Some of the funds largest holdings are Exxon Mobile Corp, AT&T, Proctor & Gamble and Microsoft. Not only is the 500-index fund tracking the performance of hundreds of individual companies, the companies come from several different sectors in the economy. This means that if the energy sector goes belly-up, your investment will be okay because you were only 11% vested in energy with this fund. Or if Microsoft goes bankrupt, it won’t be a huge problem because Microsoft made up only 2-3% of your entire fund.
Pacific Stock Index Fund– This fund is interesting because it is made up of corporations in Asia and Australia. Some of the companies that are held by this index fund are Toyota, Mitsubishi, Canon and Nintendo. Although those companies are huge, they only make up about 7% of the entire fund. The fund is also diversified as far as where the companies are located. This fund is comprised only of corporations from Japan, Australia, Hong Kong, Singapore and New Zealand.
As you can see, index funds allow your investments to be extremely diversified. They are also great because they do not require much managing which means you pay hardly any management fee. If you are still interested in investing some money in the stock market, I highly recommend that you call a company such as Vanguard, Fidelity, or Charles Schwab and have them set up an account for you and advise you on your investment options.