Where to find the firm index date
How We Became Millionaires with Index Funds | Vanguard, Schwab, & Fidelity
hey guys it's a mom and Kristina from
Aris journey today we are talking about
the index fund and if you know our story
you know that we are index fund
millionaires we were government
employees quietly sitting in our
cubicles investing in index funds and it
allowed us to achieve financial
independence and retire early and so on
today's video we are gonna dive deep
into index funds and talk about them in
a way that most people do not talk about
them provide a brand new perspective
when it comes to using them as an
investment tool for financial
independence so in this video we are
gonna go over the history of the index
fund how it helped us become
millionaires and we're gonna go over our
top picks for index funds with Vanguard
Schwab and fidelity so before we get
started we want to actually define what
an index fund you have to define first
so an index fund is a portfolio that
tracks different stocks bonds and other
securities and an index fund is actually
a type of mutual fund but that's where
it ends a lot of people think mutual
funds and index funds are
interchangeable that they're the exact
same things but they are not an index
fund is just one type of a mutual fund
so what's so unique about an index fund
is that it is set up to match an index
or track a particular market now other
mutual funds that are not index funds
they are different because instead of
trying to match the market they are
trying to beat the market now this
difference between an index fund and a
mutual fund is very important because
the sole purpose of a mutual fund is to
beat the market on the other hand the
sole purpose of an index fund is to
match the market or match whatever
sector it is set up to track now this
brings us to our history lesson for the
day you see it is very important when
you are investing to understand your
history and history when it comes to
investing is a powerful tool it will
keep you on track when times get rough
so the history of the index fund
actually starts in 1970
the index fund was invented by Jack
Bogle the founder of Vanguard so before
1975 the only way you can invest in a
batch of stocks was through the mutual
fund now the problem with this was that
mutual funds could rarely beat the
market so Jack Bogle came up with this
earth-shattering groundbreaking idea
which was rather than trying to beat the
market why not create something that
would mimic the market oh and he had
some haters because as soon as he said
that he had invented the index fund and
his idea as simple as it was created so
much controversy because admit that you
did not need the mutual fund manager and
even till this day you still have index
fund haters because how can you justify
charging people in exorbitant amount of
money to manage a mutual fund when the
index fund is beating it so by creating
the index fund a huge chain of events
occurred first you no longer need an
individual to manage the fund second it
cuts out all of these costs costs become
a lot lower and performance becomes
better because you're tracking the
market and this is the best part it made
it easier for individuals regular
investors to invest in the stock market
you see there are thousands of mutual
funds and thousands of mutual fund
managers and so it is very hard to pick
who is the best mutual fund manager
who's going to be the all-star that year
when it comes to investing in the market
but if you are trying to mimic the
market to match the market you just pick
the index that does that so this brings
us to our style of investing we have
always invested in index funds we have
never invested in mutual funds with a
mutual fund manager that's trying to
beat the market we are just trying to
mimic the market and that's why we
choose index funds and this is where we
get deep into the philosophy of
investing in index funds
you see index fund investing is a
long-term investment
whereas mutual fund investing you are
actually being more speculative because
when you invest with a mutual fund you
are speculating that that mutual fund
manager
is gonna have the right pics year in and
year out but when you are investing in
index funds what you are saying is that
you believe in the history the
historical run of the stock market
always going up so even though index
fund investing is long-term and it's
fairly automatic you still have to do
some research and determine what type of
index funds you want to invest in now
for us Eon our fire journey we decided
to focus on an index fund that tracked
the complete total stock market and an
index fund that tracked the S&P 500 now
when you hear that we were investing in
the S&P 500 and the total stock market
some of you may be saying well why
because both of those indices are very
similar well at work through our 401ks
the SMP 500 was the best investment that
we can make at work but outside of our
work account outside of our 401k
investing in the total stock market was
the best investment for us now the
difference between the SP 500 index fund
and a total stock market index fund is
that the SP focuses on the top 500
companies on the stock market whereas a
total stock market gets them all against
the small ones and it gets the big ones
we've invested in bang guards V FIA X
that's Vanguard 500 index fund for
Admiral shares and year-to-date it's up
over 23% it has an expense ratio of 0.04
percent Schwab also has an SP 500 index
fund that is up around the same amount
and has an expense ratio of 0.02 percent
fidelity as well up 23 point 17 percent
and an expense ratio of point zero one
percent but not all index funds are
created equally it has to deal with the
brokerage firm that creates the index
fund so for example we found the Ryder
SP 500 CE which is through guggenheim
investments it's up twenty point five
nine percent which is good but when you
compare it to other index funds it's not
that great also the expense ratio is a
whopping two point four one percent now
this is an example of an index fund that
tracks the S&P 500 but is making less
money for its investors because of the
huge
offense ratio and this is because the
brokerage firm creates the index fund so
when you select that index fund you are
deciding to invest with that particular
brokerage firm so this is a very
important point because you are picking
the company that you are going to be
investing your money with and there are
a lot of different companies out there
but be careful who you sign up with
because there are some brokerage
companies that will charge you X or
berate fees for their services and then
there are some brokerages that would
charge you reduced fees and investing in
index funds is always about getting to
the lowest fees because all index funds
should be tracking the same indices so
if you go with the firm that's charging
you 2% to track the sp500 you are being
robbed because there is another firm
called Vanguard Schwab or fidelity that
is charging you way less than that for
the same index fund
now we ultimately decided to select an
index fund with Vanguard and we chose
Vanguard because of several reasons one
is because of the low cost index funds
the second is because of the various
accounts that we can open with them
including custodial accounts for our
girls we also opened up a Roth IRA
accounts with them and we use Vanguard
to roll over our old 401 KS into a
traditional IRA
so what we want to do now is talk about
the specific index fund that we invested
in Vanguard
but what like we said we realized that
there's other brokerage firms that exist
and so we want to focus on Vanguard on
Schwab and fidelity so we're going to
talk about what we invested in Vanguard
and then we're also going to talk about
the equivalent investments with Schwab
and fidelity now you have a lot of
choices when it comes to investing in
index funds but for us the total stock
market has always been what we felt the
most comfortable investing in because we
believed in the overall stock market we
believe that overall it will go up
so in Vanguard we invested in BTS ax and
we did a whole video on BTS ax and
everything you need to know about it but
BTS ax has been the number one
investment for us on our financial
independence journey
I mean year-to-date and BTS ax is up
over 22% I mean the return by just
tracking the stock market has been
amazing and that is the power index
funds is that when you invest in them
over the long term you see that type of
growth so like we said BTS ax has a
year-to-date performance of twenty two
point five three percent but Schwab has
a similar total stock market index fund
called SW TSX its year-to-date
performance is twenty-two point five
eight percent but its expense ratio is
actually lower at point zero three
percent and fidelities equivalent total
stock market index fund is VZ ro X it's
your today performance is twenty two
point seven eight percent but it's
expense ratio is zero percent so we did
that to illustrate the strong
similarities between total stock market
index funds now what it comes down to is
the preference that you have when it
comes to picking the brokerage that
you're going to be buying your total
stock market index fund with because
that is the most important thing as well
you need to be able to feel comfortable
investing with that company so take a
look at the expense ratios take a look
at their customer service because they
may be holding millions of your dollars
and you want that relationship to go
smoothly now we didn't have millions of
dollars when we first started investing
in index funds but what was important to
us
was finding the right index fund knowing
the brokerage firm that we wanted to
invest in and doing our proper research
so for you if you're interested in
investing in an index fund make sure
that you do the research so that you
know how to properly invest and if you
liked this video make sure you give us a
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