 How would you like to make better returns than 99% of individual investors and 85% of hedge fund managers? Well, there's actually a way to do this while paying almost nothing in fees, having zero investment knowledge and spending almost zero time researching the stocks. And the way that you do that is index funds. And I've said this since the beginning of my channel, index funds are some of my favorite investments. I love it! And I would argue that if you're a beginner or you're somebody who doesn't really want to spend much time researching stocks or you have no passion for it or you just wanna get a decent return on your money without spending any time on that, index funds might be the best possible investment for you. And at the very least, I think index funds should be a significant amount of every investor's portfolio. And in this video, I'm gonna break down in plain English everything you need to know about index funds. And at the end of the video, I'm gonna do a tutorial on two different stock brokerages where I invest in index funds live. All right, so super excited about this one and I'm gonna try to keep the video as short as possible but for if whatever reason you don't have enough time, there are going to be timestamps down in the description below. So gently tap that like button if you appreciate my hard work and let's get into it. All right, so index fund investing for beginners. Let's get started. All right, so in this video, this is what we're gonna cover in order. So we're gonna start off with what is an index fund? I'm gonna go over a short history of index funds. Then we're gonna talk about John Bogle and why he's so important. Then I'm gonna cover why you should invest in index funds. Then we're gonna talk about the difference between index funds, ETFs and mutual funds. Next, how to invest in index funds. Then we're gonna talk about different types of index funds and I'm gonna give you some examples. And there's gonna be a gift for you in this video that you're really gonna like. So stay tuned for that. I'm gonna talk about why index funds are not boring and how you can use index funds to invest in a niche, invest in an industry, a group of companies, a country or invest worldwide. And then I'm gonna give you index funds that correspond to each of those. Then I'm gonna go over some housekeeping tips on what you should do before you start investing in index funds. Then I'm gonna give my recommendations on the best brokerages, specifically for index funds. And lastly, I'm gonna go over an investing and automation tutorial on two different brokerages. One of them is gonna be more of an advanced brokerage and the other one is gonna be more of a beginner friendly, super easy one that you can just get on with your phone. All right, so first thing we need to do is answer the question, what is an index fund? Well, this probably doesn't help, but index funds are investment funds that follow an index. An indexes track a group of predetermined companies and on the top right, you see the S&P 500 index and that's basically tracking the 500 largest companies in the United States. And basically what that means is if you invest in an S&P 500 index funds, you invest a little bit in each of those companies. And if you tried to do this manually, first of all, it would probably take you an entire week to invest in 500 different companies. And second of all, it would be extremely costly from the brokerage fees. And then when you went to sell that would be even more of a nightmare. Imagine a market crash happens and you're trying to sell your stocks and it takes you an entire week to sell them. So I think everybody has heard that diversification is incredibly important when it comes to investing and an index fund automatically diversifies for you. And on top of that, index funds are passively managed. That means they're not actively managed like a hedge fund. All they're doing is simply tracking an index. And because of that, the fees are incredibly low on index funds, sometimes it's even 0%. So now that you know what an index fund is, you're probably asking yourself, why should you invest in it? And to be honest with you, index funds don't get all that much attention on YouTube because they're pretty boring. I mean, why invest in an index fund and get an average return of maybe 7% per year for the rest of your life when you could invest in Dogecoin and potentially become a millionaire? Now, other investments are just a lot more exciting than index funds. But there's a few things that are great about these. For one, you save fees. There are some actively managed funds that will charge people 2% in fees. And over a 30 or 40 year period, this would cost them hundreds of thousands of dollars. They're also very tax efficient. Index funds are designed for you to invest over the long term. And that means you're not gonna be paying very much in short-term capital gains tax. Because when you invest for more than one year, you pay what's known as long-term capital gains tax. And of course, this is gonna vary depending on where you live, but usually this is gonna save you somewhere between 10 and 17% on taxes. And again, over the long run, that can make a difference of hundreds of thousands or maybe even millions. Index funds are also incredibly beginner friendly. You know, one of the reasons you don't see a lot of these gurus talking about index funds is because it would be very difficult for them to sell a course to you. The course would be like five videos long max and you would never have to get any more investing advice again. Whereas something that's incredibly complicated and difficult like options trading or day trading, you can make hundreds of videos on that and put it into a course. Now, my favorite part about index funds is they are incredibly time efficient. You can invest in index funds very easily. And once you invest in it, you pretty much just keep it there and forget it. You don't even think about selling it for 20, 30, 40 years. Whereas if you invest in a stock, you're gonna be monitoring that stock on a day-to-day basis to make sure that the company didn't do something crazy. Because if they did, the stock could potentially go to zero. That is virtually impossible for an index fund. On top of that, many brokerages will allow you to set up automatic investing. So it's very easy to just do $500 a month, for instance. So you could hypothetically log onto your brokerage like one time and set yourself up for life. Now, on top of that, index funds outperform approximately 98% of retail investors. And a lot of people would argue it's more like 99%. And on top of that, depending on the study you look at, they also outperform between 85 and 95% of the professional funds. So there are many good reasons for you to invest in index funds. Now, I'm personally a huge fan of history. I know some people aren't really into it, but I think there's a reason to go over the history of index funds because it's really gonna hammer in a lot of the points on why you should invest in them. So the first idea for index funds, as far as we know, came from two students at the University of Chicago. This was back in 1960 and the two students' names were Paul Feldstein and Edward Renshaw. And their idea was to basically create unmanaged investment funds. Now, of course, at first, their idea was absolutely laughed at and it had little support. Like many different types of investments that have done incredibly well over the years, when it first came out, it was ridiculed. Now, in the early 1970s, John McCown was working at Wells Fargo and he came out with the first index fund type investment. And again, this was basically just an idea for an unmanaged fund. And one great quote I read from an institutional investor was, I wouldn't even buy it for my mother-in-law. So again, it was receiving a ton of ridicule. Now, the first index fund that was available for everyday people, aka retail investors, was put out in 1976 by John Bogle. And if you're interested in the history of finance, I highly recommend reading up on John Bogle. He did truly live a remarkable life. But again, everybody laughed and ridiculed his ideas for an index fund. And one way of putting this is he was basically the one honest person and an entire sea of sharks that were working in the financial industry. And he actually passed away in 2019. So rest in peace. This guy is known as the father of index fund investing and he is a true legend. And I decided to add this part in there as well because the first ETF was created in 1992 by Nate Most and it was the SPDR or SPI. And ETFs are very similar to index funds. We're gonna go over the differences here in a moment. Now, index funds trade once a day versus ETFs can trade at any time during the day. Index funds, you can automatically reinvest your dividends whereas ETFs, some do, some don't. With index funds, there is usually a minimum investment. So they might say that you have to invest at least $1,000, for instance. Whereas with ETFs, you have to buy one full share. So if the share of the ETF is $225, then you have to spend $225. If it's $22, you have to spend at least 22. Index funds are known for having very low costs. For instance, VT Saks is about 0.04% per year. ETFs are also known for having very low costs. For instance, VTI is 0.03%. Now, you do have to be very careful with ETFs. Always make sure to check the expense ratios no matter what because some of them, they try to pull a fast one on you and they'll actually have a relatively high expense ratio. And when it comes to ETFs, always make sure to check which companies they invest in and whether it's actively managed or passively managed. Because if it's actively managed, the expense ratio is gonna be higher and you're probably not gonna get as good of a return. And make sure to always do your research before you invest in anything, whether it's an ETF or an index fund. No index funds are easier to automate. It's really easy to set that up on a brokerage. However, ETFs are slightly more accessible. It's easier to get started investing in ETFs than it is an index funds. And index funds returns are tracked monthly, whereas ETF returns are tracked daily. Now I'm gonna talk about index funds versus mutual funds. Index funds are technically a type of mutual fund. However, index funds are passively managed. Most of the time when you hear the term mutual fund, that means it's going to be actively managed and that means it's gonna have higher fees. And in my opinion, index funds are the best type of mutual fund for you to invest in. But this is not financial advice, always do your own research. Next, we're gonna talk about different types of investing that you can do with index funds. So for instance, you can use index funds to invest in a niche, an industry, a group of successful companies, an entire country, or you can use index funds to invest in entrepreneurship across the world. So first I'll go over an example of investing in a niche. And this is a niche that's so new that I decided to actually just include an ETF. So if you are an expert on a certain niche and you think that it's undervalued, you might consider investing in an index fund or an ETF that has to do with that niche. So for instance, the roundhill ball metaverse ETF has a bunch of investments in companies that are related to the metaverse. Now I'm gonna say right away, the expense ratio on this one is 0.75%. So it's not ideal, but this is such a new niche that you don't really have too many options out there. So for example, if you're somebody who knows a lot about the metaverse, you think it's gonna take over the world in a similar way that smartphones, the internet, social media, et cetera took over the world, then this might be a good option for you. Next one on the list is going to be investing in an industry or sector that you really believe in. So one great example of this is a lot of people are extremely bullish on technology related stocks. So you could invest in the Vanguard Information Technology Index Fund, Admiral shares or VITAX, or you could invest in VGT, which is the corresponding ETF that goes along with that. And this basically just tracks the performance of information technology related stocks. Now there's a little bit of a problem here. We see that the minimum investment is $100,000 and I don't know about you, but I don't have $100,000 just laying around. However, the ETF is only about $430 to invest in. So a lot more accessible and that's one of the points that I made earlier on in the video. Another way you could do it is investing in a group of successful companies. So this is actually Warren Buffett's favorite way to invest in index funds and that is investing in the S&P 500. That's the 500 largest companies in the United States because maybe you believe that large companies can't fail in the current system because they're just too powerful and the government will not let them fail. They're always gonna bail them out. Kind of like what happened in the 2008 financial crisis. And so maybe after understanding that, you might think, okay, I'm gonna invest in the S&P 500. Now the S&P 500 itself actually has a little bit higher expense ratio because the name is copyrighted, it's branded. And so one that's cheaper is the Fidelity 500 index fund which is very similar and that's FX-AIX. And it has a 0.02% expense ratio. So that's a little bit better. But maybe you think things are changing and you think the government is gonna let big businesses fail the next time they do something incredibly irresponsible and stupid. Or maybe you think large companies aren't equipped to respond to the rapidly changing environment. Instead, you think mid cap companies are gonna do better. Well, you could invest in the Vanguard Mid Cap Index or VO and it has an expense ratio of 0.04%. Maybe you think that stocks in the United States are overvalued and there's some other countries that could be a lot better in the next 10 years. Well, then you could possibly invest in the Vanguard FTSE Japan UCITS ETF which is VJPN. And this one basically invests in large and mid cap companies within Japan. Now this one does have a higher expense ratio, 0.15%. So just keep that in mind. Let's say you think investing in just United States companies is risky and you wanna diversify your investments even further. Instead, you're basically just investing in entrepreneurs all across the world. Well, you could try the Vanguard Total World Stock Index Fund Admiral shares or VTWAX. And this has an expense ratio of 0.04%, so very nice. And this will give you exposure to lots of different companies in many different foreign markets. Or let's say you don't wanna invest in stocks, right? You are just about to retire and you want to invest in a security that's a little bit safer. Well, then you could invest in an index fund that is full of diversified bonds. And that one has an expense ratio of 0.025%. And if you didn't know bonds are basically where you invest a certain amount of money and you're pretty much guaranteed to get whatever they tell you you're gonna get back at the end of one year or 10 years or whatever the time period is. Another example is let's say you only want to invest in companies that are environmentally responsible. Well, you could invest in the Vanguard FTSE Social Index Fund or VFTAX. Now this one is getting a little bit high. It's about 0.14% expense ratio, but definitely a lot lower than what you'd see with many different hedge funds. All right, so what should you do before you start investing in index funds? In my opinion, the first thing you should invest in is tax-advantaged accounts like the 401k Roth IRA and HSA. And you can often invest in index funds inside of these accounts, which is highly, highly recommended. You also wanna make sure to have an emergency fund that covers at least three months of your expenses in case something happens, like for instance, a global pandemic or you lose your job and only invest what you don't need in the short term. The reason for this is because if the market goes down and then you need money, what you're gonna do is you're gonna sell your investment at a huge loss. So you're gonna be selling when that's probably the best time for you to buy. And so you definitely don't wanna do that. So never invest more than you can afford to lose in the short term. And remember, index fund is long-term investing. They're designed to be held for 20, 30, 40 years. Now let's talk about the best brokerages for index fund investing. And the three big ones, the three heavyweights are gonna be Vanguard, Fidelity and Charles Schwab. So Vanguard, they were the first ones to do it. They're the OGs of index fund investing. They are probably the most trustworthy and reliable company out of the three. And the reason for that is because they have a history of being trustworthy from the very beginning. Now the Vanguard website and app, super, super simple. No bells or whistles. So I think some of the other websites and apps are definitely more user friendly, but some people like that simple interface. There's no trading platform, no physical branches, no credit cards, no checking accounts. It's all just relatively simple and the website looks like it was last updated like 20 years ago or something. Now Fidelity is more similar to Charles Schwab than it is to Vanguard. They do have physical branches. One thing that really makes Fidelity stand out in my opinion is how user friendly they are. There's so many different services that they offer and they're trying to seamlessly fit all of them together. So you don't have to be with like 10 different companies just to use all the different financial related services. Now they do offer lower interest rates on margin loans, but I don't recommend taking out margin loans. So just don't do it. They also do have access to international trading and fractional shares. Charles Schwab, very similar to Fidelity, definitely more user friendly than Vanguard. Also way more features than Vanguard. They have lots of different options, credit cards, checking accounts, trading platform, et cetera. They also have an amazing international bank account that anybody who travels internationally raves about. And the reason for that is because you get all of your ATM fees reimbursed. And they also do have some physical branches. Now I'm gonna go over a few of the easiest brokerages to use in order to purchase ETFs. So we've got Robinhood, first app to make investing super easy and super accessible to the average everyday Joe. They also have really great sign up bonus incentives. Robinhood is ridiculously easy to use. Like it's so easy, a caveman could do it, right? That was like the Geico commercial. Well, that applies to Robinhood. And it's designed to be used on your phone. They do have a web app, but it's just super basic. It's really just a phone trading app. Webull is also very easy to use. I'd say it's almost as easy to use as Robinhood, but it has way more features. So in my opinion, Webull is good for beginners, but it's also good for intermediates. I love their app on the phone. I use it all the time. They also have a really nice user friendly web app that does have some good advanced features as well. You do have access to a limited amount of cryptocurrency trades, so something like seven of them. They do have pretty good customer service for an app and I have tested that out myself. Now they do have amazing sign up bonus incentives. And if you appreciate my hard work and you're planning on investing anyways using Webull, consider using my links down in the description below. And at the time of recording this video, you could win three stocks up to $1,800. So definitely check that out if you wanna support the channel, I really appreciate it. Another one, this is kind of the new kid on the block is going to be Moomoo. Now Moomoo is very similar to Webull. I would say that they're a little bit more of an advanced trading platform and they do offer free level two market data. And they also have more exposure to different Asian markets, which is something that a lot of people are getting very interested in investing in. All right, so a quick overview on how to invest in index funds. First, you want to choose a brokerage. Then you want to create your account. Sometimes it will take a little bit of time for them to create the account. It might take a few hours or a few days. Then you want to fund your account. Now again, depending on the brokerage you use, this could take anywhere from a few hours up to five days. Many brokerages will allow you to have partial access to some of your money. So for instance, if you put $5,000 on there, they'll give you partial access within a few hours to a thousand. But once you fund your account, you wanna make an investing plan. So maybe you wanna invest in the S&P 500, for instance, and you want to invest $300 a month. So you'd choose the corresponding index fund or ETF that matches your plan. And then you would start investing and the very last step is optional, but I recommend it and that is automate. Now again, much easier to automate index funds than it is to automate ETF investing. Now a quick note, I did mention this before, but alternatively you can invest in index funds within retirement accounts or tax advantage accounts like the 401k Roth IRA or HSA. Now this process is very similar, but it does take a little bit more research online. Many videos out there, for instance, on how to start a Roth IRA. I believe I made one like two years ago, but yeah, definitely look into that. Highly recommend tax advantaged accounts. All right, so I actually made a tutorial on investing in index funds on Fidelity just a few weeks ago. So I'm gonna jump to that tutorial right now. And the reason I'm not gonna do it live is because of the fact that I would have to create another account and then I would have to fund the account that would take several days, et cetera, et cetera. So I'm just gonna play that tutorial really quickly and I'll be right back. All right, hey guys. So I created a Fidelity account here. This is actually an account that I used a while back for my Roth IRA before I actually transferred it off of Fidelity. But anyways, I'm gonna be showing you exactly how to transfer money onto Fidelity and then buy a stock. So what you wanna do here is go up to the top left and you are gonna click on the transfer button. Then you are going to click here and you're gonna go link a bank to Fidelity account and you click continue. Now when you set up your account you probably set up two step verification so it's gonna send you a text code or however you set that up. All right, so on this part you have a few different options. You've got the electronic funds transfer option. That's kind of just your standard option. Unfortunately, it does take a little bit of time but it's free. And then you've got bank wire which is much faster but you can only withdraw money from Fidelity. Okay, so they tell you kind of the downsides to that. So in this particular case I'm just gonna do an electronic funds transfer and then I'm gonna select my individual account and then I am going to link my bank account. At this point you basically just have to enter in your routing number, account number and then it's gonna make you re-enter your account number. So there's many different ways you can find this information. When you started the bank account you were probably given this info. You can also log into your bank account online and it should be there but you can also look at the bottom of checks. That's another place where you can find those numbers. After you have entered that information in you just go ahead and click agree and continue. All right, so as it says at the top of the banner success, your bank account has been linked. Now you click on the bottom left here, transfer money now and then you click on your bank account. You wanna then click on your individual account. The frequency here is just gonna be just once and the amount I'm gonna do is $1,000 this time. So go continue. Just wanna review the transfer details one last time and submit. So at this point you just have to wait a little bit for your funds to get into your account and then after that you will be able to purchase stocks and actually Fidelity makes it to where there is a certain amount of money that's available right away. So it looks like in this case the cash available to trade is about $1,000 right now. So there's sort of just trusting that that money is actually going to get into your account more or less. If you ever have any issues with your bank they may not have that as an available option. All right, so that did not take very much time at all to fund the Fidelity account. The funds were pretty much available right away. Unfortunately it was after market hours so it is the next day. But this is the main page of Fidelity. You might find yourself on this one. You would just want to go to accounts and trade. Go up to trade here. Select which account you want to do. Your individual account go. And then here you can look up different stocks, ETFs, et cetera. The Fidelity zero total market index fund. So we're going to click on that one. Going to click buy. All right, we're going to end up buying about 62 shares or so. So it's going to be around $1,000. Preview the order. You go down here and you go place order. And there you go, order is executed. So really easy one. That Fidelity index fund is great because it basically just tracks the entire market. So however the entire market does, which historically speaking it's done extremely well, you are going to increase your earnings on par with that. Definitely one of the safest investments you can possibly make. All right guys, back to future Shane. So what you want to do in order to set up automatic investments is you go to accounts and trade on the homepage. And then you go down to account features and click on that. Then you click on payments and transfers and then go to automatic transfers and investments and click on that. You want to go down here and set up an automatic investment. And keep in mind this is after you've already purchased an index fund, right? So you've already purchased an index fund. You've already linked your bank account to it. You've already funded your account, et cetera. They won't let you do this until you've made at least one purchase. So there's several different ways to do this, but you could just do this accounts core position after you've already made a purchase. You go to continue. This is where you would choose the fund. You would say what amount you want to do. Down here you would choose the frequency. So you could do it monthly, you could do it quarterly. You can also set a stop date if you'd like. So you can stop making investments at a certain date. For instance, if you're going to retire at a certain date you might stop making investments because you don't have a steady income. And then you would scroll down to the bottom here once you're done setting all that up and you click next and you're pretty much good to go. So that's how easy it is to set up automatic investments on Fidelity. All right, so now I'm going to go back in time very quickly and show you how I funded the Webull account and I made a purchase as well. So say hi again to past Shane and I will see you here in a few minutes. Hey guys, so I'm going to be funding my Webull account with $9,000 in order to buy some stocks. This is Webull, you know, it's not that hard to create the account. It's got some options here. You can go markets, look up some cool information, cryptos, global, explore, et cetera. Go to community, there's some cool stuff there. This is just my dummy account that I use to make videos and stuff, messages. And basically the one we're going to be going to is this middle one here. And on here, what you want to do is click detail and then go down a little bit, click buying power or on buying power to the right, you'll click deposit. It's going to have on the very top here, it's going to have you sign up to your bank account. So you want to link your bank account. Most common is an ACH transfer, it does take a few days. However, you will usually, depending on the brokerage you're using, get access to your funds pretty much right away. So basically you just need your routing number, your account number, some basic bank information, pretty easy to do. Go here to the amount, I'm going to click 9,000 and transfer to Webull. And it's that easy. Hey guys, Future Shane back again. So we're going to go ahead and make that purchase on Webull. So the easiest way to do it is to just go ahead and click the markets tab at the bottom. And then it should automatically set to the United States if you're watching this from the US, but you have options to do crypto, global, explore. There's a lot of good stuff you can see there. And the one that I'm interested in buying is going to be VGT. Now this is basically an index fund. Now VGT is basically an index fund that has a little bit more exposure to technology related stocks. And one thing about technology related stocks is they did incredibly well during the pandemic. Everybody knows that, but even before the pandemic, they still did extremely well. They outperformed other types of stocks. And another thing about technology related stocks is they tend to be very scalable. So with some types of companies, they run into issues at some point because they simply cannot scale the company and make more money. Whereas with technology related companies, that's not nearly as much of an issue. You know, you don't have to have a lot of inventory to sell more software or digital products. So for that reason, and many more, I did a lot more research than that. I am going to invest some money into VGT because I think it is an index fund where you're going to have really diversified stocks, but at the same time, you have more exposure to technology related investments. So I'm going to type in VGT here and you want to always make sure that it's the right one, but this is going to be an ETF and you can look at all this. You've seen that, you know, over the last five years or so, it has gone up quite a bit. It had that dip when the pandemic started, just like everything else. And then it went up a ridiculous amount since then. So very nice, steady growth. That's what you would expect to see from an ETF. So on the bottom left, I'm going to tap trade. Going to set the quantity to, looks like I can do 21 without running out of money. Going to make it a market order. And then I'm going to click buy and confirm. And my order was filled almost immediately. So we're good to go. All right, so now we're going to talk about how to sell your stock on Webull. And this is the part where my accountant is going to hate me because I'm basically buying and selling stocks within a few minutes. So there's several different ways you can get to your stocks. You can look at the main page, the middle one on the bottom, look at what stocks you own, or you can just go to markets and then search the stocks as well. That's another way to get to it. But I'm going to go ahead and click trade on the bottom left. And I'm only going to sell one of them because I just think it would be so wasteful just to buy and sell all of them. But I'm going to go ahead and just set a market order here. I'm going to sell and just sell one of them and confirm. And it sold it pretty much immediately as well. So as you all saw, incredibly easy, super straightforward. For people who have used other investing apps, you see how super easy this is. Some of the other ones actually make it incredibly complicated. It's almost like as if you had to learn a new software at work or something and it takes a long time just to be able to do the basics. But with Webull, incredibly easy, plus you have a bunch of extra options as well. All right, so future Shane here again. Unfortunately, Webull does not have the ability for you to set up automatic investments. They've been talking about setting this up and I really hope they do because that's one of the biggest downsides to Webull. Although to be fair, most of the other investment apps don't offer that either. Check out this other video right here. I think you'd really enjoy it if you made it to the end of this one and go ahead, gently tap that like button, hit the subscribe button, ring the notification bell and comment down below any thoughts, comments, criticisms, et cetera that you have on the video and I will see you next time.