Index fund

Exactly one year ago I put some money into an [Index fund] 1. Leaving all your money in a savings account is not the best way to invest it. Especially now because of the financial crisis: central banks rates are low. This means that the rates you’ll get from a savings account will be low too.

Index funds are a good way to increase the return on your money if you’re willing to accept the risk. It’s almost guaranteed to be a good move if you are planning to leave the money there for a long time —10 years or more.

2009 was a good year to invest in stocks. Because the world stock markets were in turmoil: prices were low. But I was like most people: scared. I didn’t want to invest my money while prices were still falling; I wanted to be sure that stocks were well on their way up. I opened my account in September 2009, when stock prices had already recovered a good chunk of their value. In September 2009 when the [S&P TSX Composite] 2 was at 11400, up from less than 8000 in early 2009.

Overall I think this has been a good decision. Today, the TSX is up by about 6% to 12100. That’s below average by historical standard, but still much more than 1-2% I would have had if I had left everything in a savings account. The fund fees and dividends from the stocks more or less compensate each other, so the index is a good indicator of how well the money is doing.

The biggest downside is that I check Google Finance all the time to see how the index is doing. Another distraction I don’t need...