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I have already written about my approach to money and how I began investing. I have also discussed the importance of time in investing and why starting as soon as possible is crucial due to compound interest. Now, I will describe how to start investing and what to watch out for.
Investing in Individual Shares vs. Stock Market Index ETF
I will not focus on investments in individual shares. For most people, this is an inappropriate form of investment. The smartest minds on the planet, along with sophisticated algorithms, are dedicated to it. It is like playing football against Messi—nonsense for most of us. It makes more sense to benefit from the fact that the stock market grows in the long term. That is what I will focus on today: profiting from the stock market's long-term growth by investing in the world stock index.
What is a Stock Index?
A stock index is like a summary of how a group of companies is performing. Instead of checking each company one by one, the index gives you a quick look at how the whole group is doing. If it is going up, the group is doing well. If it is going down, they are having a tough time.
The Developed World Stock Index
The developed world stock index (the MSCI World Index) has an average annual growth of more than 10%. I explained what an annual compound interest of 10% means in my previous post. I recommend reading it; understanding this concept motivated me to invest. Knowing that the entire stock market of the developed world grows at more than 10% per year, investing becomes an absolute no-brainer for anyone who thinks even a little about the future.
How to Invest in the World Stock Index
The answer is through ETFs (Exchange-Traded Funds).
What is an Index ETF?
Think of an ETF as a mix of different investments all packaged together. When you buy a share, you get a part of everything in that package. An index ETF is a type of ETF that follows a particular stock index. It is like buying a pre-made collection of all the stocks in that index, making investing easy and diversified.
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Disclaimer
This article is intended for informational and educational purposes only. It does not constitute financial advice, a recommendation to buy or sell any securities, or a guarantee of future market performance. The views expressed are solely those of the author, who may also be an investor. Investing in financial markets involves risk, and each reader should make their own decisions independently and, if necessary, consult with a licensed professional.
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Common questions on this article's topic
What is a stock index ETF?
What is the MSCI World Index?
What is TER and why does it matter?
How much money do I need to start investing in an ETF?
Accumulating or distributing ETF — which should I choose?
What mistakes do beginners make when choosing their first ETF?
If you have any thoughts, questions, or feedback, feel free to drop me a message at mail@richardgolian.com.
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