One of the ways that you can diversify your portfolio, while at the same time limiting some of your risks, is to invest in index funds. An index fund is a group of investments that follows a specific index. If you invest in an all market index fund, then you get a little share of everything on the stock market. There are funds that follow the S&P 500. You can find index funds that follow specialty indexes, such as those for alternative energy, or small business. You can even find index funds for bonds and other investments.
While investing in index funds isn’t everything, this strategy can provide you with a way to earn market returns, pay low fees (index funds cost much less than actively managed mutual funds), and build up your nest egg. Choosing index funds, though, can be somewhat daunting. If you have a little less than a minute, though, you can get a head start on the process:
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