Why Small Investments Can Make a Big Difference

Many people avoid investing because they think they need a lot of money or knowledge. But Warren Buffett, a famous investor, suggests a simple way to begin: an S&P 500 index fund. This fund follows the performance of the 500 biggest companies in the US. It's a straightforward way to start, even if you don't have much cash or know much about investing.

Start Small

You don't need thousands to start. Some funds, like the Schwab S&P 500 Index Fund, have shares for around $17 each. You can even buy parts of shares if you want to start with less. The key is to begin and keep going. Over time, your money will grow from your contributions and the magic of compounding returns.

No Expertise Needed

Investing can seem scary, but it's like learning anything else. The great thing about index funds is that you don't need to be an expert. Your money just sits there, growing over time in a mix of stocks. If you have questions, you can visit places like Charles Schwab or Fidelity. They have experts ready to help, and it's usually free.

Market Downturns Are Normal

It's normal to worry about losing money, but history shows that the S&P 500 bounces back from downturns. Yale economist William Goetzmann found that if you wait five years after a market drop, you're likely to see your money recover. So, if you're in it for the long haul, you'll probably be okay.

Exploring Other Options

The S&P 500 isn't the only option. Some experts suggest looking at all-world index funds, like the Vanguard Total World Stock ETF. These funds invest in companies from all over the globe. While US stocks have done well in recent years, some analysts think international markets might do better in the future.

Just Start

But here's the thing: it doesn't matter too much which fund you pick when you're starting out. The most important thing is to just start. As financial planner Chris Chen says, the key is to get the ball rolling.