Simply the best?
An index is a collection of shares of different companies. The S&P500 in the US, the FTSE100 in the UK, and the TOPIX here in Japan are all examples of indexes. You can buy indexes in the form of mutual funds or ETFs (exchange traded funds).
The benefits of buying an index is that you don’t have to worry about individual companies. You basically own a piece of all the companies in the index, and will benefit from the average of their success. Companies going bankrupt will not wipe out your investment. This investing approach requires minimal time (you basically just have to choose your index and buy it from time to time).
The real advantage of index investing is that it is a passive approach with very low costs. By choosing the cheapest mutual funds and ETFs you can reduce your costs and keep more of your profits. The best index investments only have 0.2% a year or so in costs. In contrast, actively managed funds can run to 2%, 3%, even 4% a year. The difference these costs make over the long term are staggering.
Andrew Hallam, a Canadian teacher at an international school in Singapore, has a great blog and is also the author of Millionaire Teacher, one of the best introductory books on investing for retirement. It’s also extremely readable and will provide you with several thousand times the amount you pay for it. Please buy and read his book before you continue -it really is that good.