The First Time I was Told to Use Index Funds

The first person who told me to invest in index funds was……guess who….a stock picking stock broker.

This is not uncommon. If you read the financial media long enough you come across numerous articles to this effect. The premise is always the same. A hedge fund manager, investment banker or stock broker — basically someone whose livelihood is based on picking stocks and trying to outperform the market — admits to the media that they invest their personal money into index funds.

And it was the same with me. The guy who first told me to invest in index funds was a broker who spent all day on the phone with clients buying and selling stocks in an attempt to “beat the market.”

I was 22 at the time. We were making small talk about investments.

He said to me (I am paraphrasing here):

Him: If you ever invest your own money, just open an IRA and buy an S&P 500 index fund.

Me: What? Really?

Him: Yeah. It is really hard to beat the market. Most guys don’t do it. Just buy an S&P 500 index fund and hold on forever.

Investors that work with Foster Wealth know our strategies are based on the same logic as index funds. That is, reduced costs, consistent risk exposure, and an increased likelihood the investments can recover after a downturn. If you have a broker who picks stocks, consider that there is a decent chance they also prefer index funds….just with their own money.

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