what I'm going to recommend to you as
far as the passive investment is to
invest in what's called an index fund
index funds give you the added benefit
management fees in fact in most cases
these index funds I'll perform the
actively managed mutual funds so the guy
that you're paying to manage your money
is not even able to beat market returns
in most cases so what exactly are you
paying them for with those management
fees and those transaction fees every
time that they restructure the portfolio
and change around the investments you're
paying some kind of fee for that and if
they're not even able to beat what the
market pays why are you doing that what
is the benefit of having active money
management that's a big question rather
than paying someone to actively manage
your money and rack up those investing
costs just invest in an index fund which
gives you broad exposure to the market
so index funds hold investments which
results in fewer or no trading costs
when you invest in the mutual fund and
they're actively trading investments in
restructuring it you're paying trading
costs every time you do that now if you
decide to invest in individual stocks
and you trade stocks or a stock broker
you're going to be paying transaction
costs every time you buy a stock and
sell a stock now this may not seem like
a lot of money but for active traders
this adds up to a lot of money being
wasted just in transaction costs index
funds are also more tax efficient every
time investments are sold within the
mutual fund you have to pay a capital
gains tax on that
but when investments are not being sold
there's actually less of a tax drag on
that so you get a better return on your
investment over time so that's just one
of many benefits of index funds over
mutual funds as far as which index fund
is the best I highly recommend Vanguard
index funds the average Vanguard index
fund expense ratio is 71% less than the
industry average and the lower the
expense ratio is the more money stays in
your pocket and the more money is being
reinvested I know this may not sound
like a lot of money but if you look up
the cost of mutual funds with just one
or two percent expense ratios over 30 or
40 years we're talking hundreds of
thousands of dollars or more that you've
lost
expense ratios this is largely due to
compound interest something that you
want to take advantage of as an investor
so just understand that even though it
sounds like a small amount of money
we're talking hundreds of thousands of
dollars in long-term investments being
lost with high expense ratios as far as
which index funds to invest in I'm going
to give you guys six recommendations
here if you want to learn more about
these I'm going to give you the symbol
of them just type them into Google it
will bring it right to the vanguard page
and you can learn more about them I just
want to speak to you guys that I am in
no way being paid by Vanguard to offer
these I simply want to give you guys the
best advice possible and give you my
best recommendation these are the funds
that I recommend to anyone and I am in
no way getting any kind of kickback by
recommending these to you guys number
one is vti
which is the Vanguard total stock market
ETF this basically gives you exposure to
the total United States stock market
number two is VX US which is the
vanguard total international stock
market ETF this gives you exposure to
all non United States stocks so this is
exposure to global stocks outside of the
US number three is VT which is Vanguard
total world stock ETF which gives you
exposure to not only the united states
tax but the stocks and the rest of the
globe as well the VT Vanguard total
world stock ETF gives you the most
diversification and the broadest
exposure possible and ETF is an exchange
created fund what this means is that
exchange-traded funds trade on a
secondary market through a stock broker
so in order to invest in an ETF you
would need to have a trading account of
some kind you would have to go through a
secondary market through a stock broker
and buy these funds on an exchange so in
order to do that you would have to open
up a trading account and do this online
yourself or call up a stock broker who
could do this for you there is an easier
way to do this and this is called
admiral shares through Vanguard
when you invest through admiral shares
you don't have to do this through a
secondary market through a stock broker
so my fourth recommendation would be DTS
a X which is the Vanguard total stock
market admiral shares this gives you
exposure to the total US stock market
through admiral share
I'll explain what that is in a second
and then we have vti ax which gives you
exposure to Vanguard total international
stock market which is going to be
everything outside of the US and this is
also Admiral shares now Admiral shares
are a special class of Vanguard index
funds with a lower expense ratio as a
result of larger accounts so basically
because there's a larger amount of money
under management - they can charge a
significantly lower expense ratio the
only thing with this is there is a
higher minimum account balance so there
is a higher minimum balance to open up
one of these accounts with Admiral
shares but the benefit of this is you
don't have to go through a secondary
market or through a stock broker you can
just go on Vanguard comm and invest
directly in this now if you're looking
to have exposure to all global markets
not just international or just us
there is the BT wsx which is the
vanguard total world stock but this is
investor shares so this is a slightly
higher expense ratio than those Admiral
shares they don't have a vanguard total
world stock Admiral shares plan
available yet so it's not a ton of money
it's still a very low expense ratio but
it is slightly higher than those Admiral
shares
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