This episode is all about index fund investing. Figuring out how to invest can be a big challenge for many people, Jillian included. JL Collins joins her to talk about how to simplify the process.

Listen here at Lisbyn, Apple, Castbox, or your favorite player.

Investing in the Market can be Scary.

Jillian waited too long to enter the world of investing. It was intimidating, and she didn’t really understand it. 

The markets can be scary—the volatility, the fear of crashing. But you’re not alone; a lot of people feel the same way, because the investment world just makes it scary. JL likens it to a banquet table with every imaginable delicacy available, while a small amount of healthy food is set in a far corner. You don’t need all the unhealthy delicacies; go for the healthy food, the healthy investments.

“In the investment world, that’s lost cost index investing.”

JL is all about making and keeping things simple when it comes to investing. It doesn’t need to be scary or complicated. 

So what is an index fund? Put simply, it is a basket of stocks that reflect the things in that index. JL recommends the index fund VTSAX, and that is the total stock market index fund that buys every publicly traded company in the United States. That way, you’re not trying to guess what company will perform well and which won’t. Instead, you buy the entire basket and enjoy the overall return of stocks.

Save Money By Not Paying Fund Managers.

The next benefit to this index is that you don’t have to hire expensive managers to try and make guesses for you. You really want to be careful of cost, because even a little bit that seems small can pull off enormous amounts. 

JL Collins only recommends two index funds: a total stock market index fund and a total bond market index fund, because stocks and bonds play different roles. And that’s it; you’re done! The ups and downs in the stock market don’t matter, because you’re investing long term, so just keep adding to the pot when you can. 

“The more you tinker with your investments, the worse results you get.” 

People who are more invested and likely to take action when things go down have the disadvantage. Instead, it’s the people that have the ability to ignore and disconcern themselves with the ups and downs that come out on top. The important thing to remember is that the overall trend is up, and long term is the key. 

Here’s a breakdown of the episode:

[01:04] Jillian started investing later than she wanted because investing was intimidating. JL Collins explains that yes, it can be, but it shouldn’t be. There’s lots of overwhelming options because the investment world tries to make it complicated.

[03:57] Investing really can and should be simple, and the place to start is an index fund. JL explains that an index fund is simply a basket of stocks that reflect everything in the index and that you should start with VTSAX, the total stock market index fund. 

[07:26] The stock market goes up and down, and that can be scary and intimidating, especially when people around us panic. The trick is to ignore the ups and downs and not touch anything. The people that aren’t interested in messing with the details of the stock market are the ones with the advantage, so don’t tinker with anything, just keep adding to it, and don’t worry about the rest!