Day 27 of 28 Days Richer
One thing each day that puts money in your pocket and takes 5 minutes or less.
If someone asked me the single best way to start building wealth, I’d say the same thing every time: index funds.
They’re boring, they’re simple, and they’ve typically outperformed most professional fund managers.
Here’s everything you need to know.
Want to go deeper? John C. Bogle’s case for index funds is one of our must-read investing books.
What Is an Index Fund?
An index fund tracks a specific market. Instead of paying someone to pick stocks for you, it just buys everything in that market automatically.
A FTSE 100 index fund owns all 100 of the biggest UK companies.
A global index fund owns thousands of companies across the world.
One purchase. Instant diversification. Tiny fees.
Why They Beat the Alternatives
Around 90% of actively managed funds fail to beat index funds over the long term.
That means 9 out of 10 fund managers – people paid hundreds of thousands a year to pick stocks – lose to a fund that just buys everything and holds it.
The reason is fees.
Active funds charge 1-2% per year.
Index funds charge 0.1-0.3%.
That difference compounds massively over decades.
A 1% fee difference on £100,000 over 30 years could cost you over £50,000.
The Main Types
You don’t need dozens of funds.
One or two will do the job.
Global All-Cap – Thousands of companies across every major economy. The closest thing to “buy the whole world.” This alone could be all you need to keep things simple.
S&P 500 Tracker – The 500 biggest US companies. Heavier on tech and growth. Good if you want more US exposure alongside a global fund.
Bond Index – Government and corporate bonds bundled together. Lower returns than shares, but steadier. Useful for smoothing out the bumps as you get older.
Search “global index fund” on any investment platform and you’ll find plenty of options.
Do your own research, compare the fees, and pick the one that suits you.
Today’s 5-Minute Action
If you haven’t already, open a Stocks and Shares ISA.
Everything you invest inside one grows completely tax-free – no capital gains tax, no dividend tax.
You get £20,000 of allowance per year and it resets every April.
Trading 212, Freetrade, IG, Hargreaves Lansdown all offer them. You can even get free shares just for signing up.
Pick one, open the ISA, find a global index fund, and set up a monthly contribution.
Even £25 a month is a start.
The best time to start was ten years ago.
The second best time is today.
Trading 212 provides access to over 10,000 stocks, funds, ETFs and investment trusts.
They offer commission-free trading* and their auto investing feature is excellent.
OUR OFFER - To get free fractional shares worth up to 100 EUR/GBP, you can open an account with Trading 212 using promo code 'GAINS'. Terms apply
*Other fees may apply. See terms and fees
**When investing, your capital is at risk. If you enable interest, Trading 212 will hold your cash in qualifying money market funds and banks. Otherwise, your cash will be held only in banks. Interest applies on cash in an investment account. Terms apply.
- Commission free trading*
- Earn interest on uninvested cash**
- Fantastic mobile app
- Award winning ISA
- No personal pension
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