This week’s episode is on investing! In episode 2 we covered investing in your 401(k), but this week we are looking at the different ways to invest on your own. Stacey gets into why it is important to have a diversified portfolio and what that even means, index and exchange traded funds, and her tips on how to get more consistent returns over time. She covers why you don’t always need to buy the “sexy” stock that all your friends may be buying.
Passively managed funds, such as index funds or exchange-traded funds, typically invest in the same securities that make up a particular market index in an attempt to match the performance of that index. Because there is less work involved with managing passive funds, they tend to have lower fees than actively managed funds. A passively managed fund does not have a management team making investment decisions.Instead, the fund manager creates a fund portfolio that includes most, if not all, of the associated index’s holdings with the goal of trying to achieve the same returns as the index. Instead of making numerous and frequent trades, which occurs with active management, passively managed funds typically hold onto their underlying securities for the long run. Long-term growth and portfolio diversity, which can help minimize risk, are key advantages of passively managed funds.
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