It is believed that the market itself performs exceptionally well, with the biggest companies being very good leaders. The main indexes pick the best of the companies in their respective exchanges.
The two super exchanges are the New York Stock Exchange and the Nasdaq Stock Exchange.
The New York Stock Exchange index is the Dow Jones, and there are 30 companies in the index.
The Nasdaq Exchange uses its’ own index, which has the top 50 and 100 companies.
By picking the top companies in both exchanges, a person would get similar results to these indexes.
The S & P put the Dow Jones and the Nasdaq together and uses a few other companies in order to figure out how the whole United States is doing.
The S & P has historically gone up about 7-8% annually over the last few decades. Therefore, if an investor was to buy a basket of these stocks by purchases some Mutual Funds and ETFs, they would increase their portfolios at around this percentage over a long period of years. In fact, it has been figured out that about 80% of people don’t make as much doing it their own way while only about 15% beat this method. Around 5% come close to this mark.
Therefore, one of the safest ways to get a decent return over a long period of years is to simply buy mutual funds of the main indexes: The S & P, Dow Jones and Nasdaq.
Of course, there are simply many people who wish to attempt to beat the indexes or like to buy certain stocks because they like them, or they have consistently beat the 7-8% average.
Then there is the option of buying stocks that consistently average about 7-8%, but they give out dividends. The dividends then create an extra bonus, and they could be 2-3 percent more. Over many years this amount could become quite a lot of money.
This strategy will work so long as the mutual funds/ETFs are actual Dow, Nasdaq or S & P based index funds.
Don’t mix them up with mutual funds/ETFs that use the major companies in the indexes. They must be based completely on the indexes. The difference is that a manager may use most but not all stocks, but they may buy them in different percentages or vary them in some other manner. They need to be index mutual funds/ETFs.
In other words, this should be one strategy that is employed as part of anyone’s portfolio.
DB