How To Use Index Funds To Help You Build Wealth

What are 'index funds' and how can they help me build wealth?

Index funds are traditionally mutual funds, but there's a new kind of product out there called the exchange-traded fund. Whether it's a mutual fund or exchange-traded fund, an index is basically a basket of securities. Whether they're stocks or bonds, it doesn't matter. They try to match the performance of a benchmark. A benchmark - there are some common ones out there that people are familiar with - Dow Jones Industrial Average, the S&P 500, and these index funds are connected to and try to match the performance of the actual benchmark itself. There are a myriad of index funds out there. Anything you could possibly think of, there's an index fund for it. As an example, if you wanted to focus just on small companies in the U.S, there's an index fund for that. If you wanted to focus on large, huge, behemoth companies outside of the U.S, there's an index fund for that. If you wanted to focus on California municipal bonds, there's an index. Any kind of way you want to slice and dice the market, there's an index fund out there that matches the performance of that sector.