Retirement Guide: Investing Basics

I like to simplify things that are really complex.  Investing can be as complicated as you want it to be.  You and I probably don’t have time to dedicate ourselves to understanding every investment opportunity, but I have 3 rules for retirement investing.

  1. Put your money where it averages the greatest returns long term (10+ years)
  2. Treat retirement accounts as insurance for not having money when you’re old
  3. Passive indexing and rebalance periodically

Sounds simple enough, but it is somewhat complicated by taxes, deductions, interest rates, inflation, and sales people selling terrible financial products (whole life insurance). >_<

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How Are Index Funds Calculated?

Index prices are the weighted average by market capitalization of their component assets.  In the case of the S&P 500, the largest 500 companies by market capitalization listed on the NYSE or Nasdaq have their market caps added up and then divided by some number so we end up with a nice number humans can visualize.  The Index funds then tracks this index giving us an investment opportunity to buy all stocks in the index at once.

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