Originally Posted by
SonicFlyer
Exactly... this makes complete and total sense (except for the index fund part).
Having one's excess income moved to an "aggressive growth" set of properly diversified minimally managed mutual funds is the safest way to accrue wealth over the long term because you own thousands of different businesses in different market sectors and locations.
Index funds tend to be actively managed and are not quite as diverse as one might think.
I’m not sure you actually know what an index fund is.
They are called index funds because they track an index. They are passively managed in that the managers aren’t wasting any time or resources picking stocks. They just try to match the index.
Actively managed funds involve managers trying to beat the market by researching companies and picking stocks. All that research is expensive, and is why their expense ratios are much higher. Most funds with “growth,” “aggressive growth,” and “income” in their names are actively managed. And 80% will fail to beat the market over a ten year period.
Further, total stock market index funds like the other poster mentioned hold immense portfolios. For example, Vanguard’s total stock market index fund holds 3,629 different stocks across virtually every industry, from small caps to mega caps.