Index Funds, Bonds, & Precious Metals Guide
Intro
Welcome to our index funds, bonds, and precious metals guide.
Index funds, bonds, and precious metals are all potential investments for a portfolio. They typically offer reduced risk compared to individual stock-picking.
Index Funds
Index funds, (such as VOO, QQQM, DIA) are designed to track and match the movement of the market as a whole.
More specifically, they closely match the percent change of an index (such as the S&P 500 or Nasdaq), by holding a collection of percentages of many different companies.
Take the index fund, VOO; It tracks and matches the S&P 500. Both VOO and the S&P 500 have ~7.7% allocated to Nvidia (NVDA) ~6.9% to Apple (AAPL), and they move together.
Therefore, instead of choosing one company, exposure to many companies (mostly concentrated in larger companies) is easily possible.
The truth is, it is very difficult to consistently do better than an index fund over the long run.
The S&P 500 returns an average of ~13.6% annually, and the Nasdaq returns an average of ~17.7% annually, (both using data from the last 10 years).
*A glimpse of the indexes from our Heatmap. While indexes are generally stable, the Nasdaq is more volatile than the S&P 500 by comparison.
Bonds
Bonds, unlike index funds or individual stocks, are fixed-income investments.
When you buy a bond, you are loaning your money to a bond issuer (often the government or public companies). In return, the issuer repays the original loan amount, plus an interest payment, at the end of the loan period.
The investor (or bondholder in this case) earns interest off the original loan, while the borrower uses loans to raise money for operations and expenditures.
Precious Metals
Precious metals are commodities that can protect a portfolio from effects like inflation or economic uncertainty.
In today’s digital markets, you don’t necessarily need to buy a bar of gold to invest in precious metals. Instead, various precious metal ETFs exist which closely follow precious metal prices.
*Shows a step-by-step chain explaining precious metal fluctuations
Summary
