Investing in index funds is a popular activity today, and there are many funds to choose from.
The truth is, this can be a mildly profitable strategy, but it is not as good as most people think.
The majority of investors are under the impression that diversification is the best way to make money, but this really is not the case.
The reason is, you can actually make more money by going for individual stocks.
Diversification funds will always perform as the overall index does.
Most people think this is a good thing, because the stock market as a whole has shown a tendency to go up in price by roughly 10 a year.
The problem is, the inflation rate is also quite high, and therefore your total net gains are actually relatively small.
It is very possible to get a 20 return on investment from investing in specific stocks, whereas you generally will not make any more than 10 with a fund, even with the best ones.
This does not mean that funds are bad.
For many investors, index fund investing is probably their best bet, and this is because they do not have time to educate themselves about finding individual stocks.
However, they should not be your long term strategy, because you gains will never be nearly as good as what you could make by picking one or two quality stocks.
In the meantime, to find the best funds, make sure you target ones that have been making money consistently for at least the past ten years.
In the meantime, you want to learn all you can about investing, and how to find the best undervalued stocks.
In conclusion, investing in index funds can be profitable, but you definitely do not want it to be your only long term income strategy.