Once you’ve settled on your goals and timelines, you can decide which index fund strategy gives you the best chance to reach your goals. Pick the Right Index Fund Strategy for Your Timeline
Alternatively, your goal is investing for retirement-a goal that may be decades in the future-stock index funds are a great way to boost your returns over the long term. They offer more stable value, but more modest returns. More conservative investments, like bond-based index funds, are better choices for near-term investing. If you don’t have plenty of extra time to ride out market declines, you might be forced to withdraw your money and sell at a loss. Remember, more aggressive investments-like equity index funds-offer greater potential returns in exchange for more risk.
“A short time horizon indicates a lower ability to take risk, which would lead you to weight a bond index fund higher than if your time horizon were longer, which affords you the ability to take on more risk and to likely increase your stock allocation,” says Andrew Rosen, certified financial planner (CFP), president and partner at Diversified Lifelong Advisors LLC. Decide on Your Index Fund Investment Goalsīefore you start investing in index funds, you’ll want to be clear about your goals, especially when you hope to accomplish them.
