It's All Noise...

The truth is, investing and the financial world in general is a bit of a jungle. There are quarterly earnings reports, balance sheets, income statements, news events, economic data, geo-political events, market manipulation schemes, hot stocks, and a bunch of other wumbo jumbo that the average person most likely doesn't understand.

I'm here to tell you that everything that gets counted into the markets matters, but at the same time none of it matters. All it is, is noise. 

What happens is all of this noise floods into most people's brains. This is then followed by confusion, then by frustration, then defeat. They decide that it is too much work to try to understand what is going on, so they turn their hard-earned capital ready for investment over to a financial advisor.

As a beginner investor, all you need to understand is that the market moves in cycles. Up, then down, then up, then down. Simple as that.

What is 'The Market' and Why is Everyone Trying to Beat it?

'The Market' is used to describe the stock market as a whole, usually the S&P 500. The S&P 500 is a group of the 500 largest public companies in America. Their stock performance as a whole determines the performance of the market in general. 

It seems as if since the dawn of time man has been trying to beat the market in performance. 

It makes sense. What fun would investing be if you couldn't brag to your buddies how much you beat the market by each year? Fund managers have been able to beat the general market in the past, but no one has been able to do so on a consistent basis. This is because of fund management costs that eat into gains.

I won't go into the specifics of what it costs to run a mutual fund. If you'd like to learn more, here is a well written article by RothIRA.com on the differences in expenses between index funds and mutual funds.

If you are using the logic of past results to choose a firm that can beat the market as a whole, then why not just use the same logic with index funds?

The Nasdaq 100 has beaten the S&P 500 every year. 

If you're wondering what the Nasdaq 100 is, essentially it is a group of tech companies. Tech tends to bring in much more speculation, so the stocks from this group become wildly overvalued over time. This means that stock prices in this sector hit much higher ranges than that of the S&P 500 or the Dow.

The Nasdaq 100 is a much more volatile asset. But if you get in at the right time, you can pretty much guarantee yourself beating the S&P 500. If you buy into the Nasdaq about now, you can guarantee some pretty hefty losses taking place in the near future.

Why Index Funds Are Better Than Mutual Funds

• They are cheap
• They match the market
• They are diversified
• No sales commission

Index funds are available to anyone who owns a stock trading app. You don't have to worry about picking stocks, because the index fund has already diversified your investment. You will always get the same performance as the market you invest into. On top of that, you don't have to pay a salesman's salary with your investment. Cut out the middleman!

So, How Do I Take Action?

You need to find a stock broker that you are comfortable using.

I've been promoting the Robinhood Stock Trading App ever since I've started using it personally. It gives you access to nearly every stock and ETF you could possibly think of, with no trading commissions. Completely free. If you're buying stock with any other broker, you're losing a ton of money in fees.

Popular Index Funds (ETFs) on Robinhood:

• QQQ

This fund tracks the Nasdaq 100 index that I had mentioned earlier. 

• SPY

This fund tracks the S&P 500.

• DIA

This fund tracks the Dow Jones Industrial Average.

• GLD

This fund tracks the gold price without the hassle of having to store it.

What's cool about owning an index fund, is that you also receive the average dividend paid within the index, directly into your robinhood account. You can do what you wish with the dividends, but I highly recommend reinvesting them.

It's not just me who thinks index funds are the way to go. Investing legend, Warren Buffet has also been quoted saying that index funds are the best way to invest your money in the long-term. Read an article about it from The Motley Fool here. 

Disclaimer: I am not a financial advisor. The articles that I write are for educational purposes only. Do your own research and hold yourself accountable for the investments that you choose to make.

Thanks for Reading!

If you're interested in receiving a free share of stock, sign up for an account on Robinhood using my referral link:

http://share.robinhood.com/micahm18

Robinhood is the first zero fee stock market broker that offers free option trading, crypto trading, and much more. I make all my trades on this platform and pay no commission. This is a zero obligation sign up. All you need is your personal information such as your ssn, birthdate, and your name. Robinhood is an SEC and FINRA regulated company. It's monitored by the federal government and is 100% safe. But don't believe me, just look it up for yourself. 

1 in 150 chance of getting a Facebook, Microsoft, or Apple Stock

1 in 90 chance of getting Ford, snapchat, or AMD stock

100% chance of getting a free stock

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