Hi, my name is Eric Udvari, and I am the Wealth Manager in our Boise, Idaho office. 

 Let’s spend a couple minutes breaking down what it actually is. I find the best way to describe an index fund is to think about it as if it is a basket of different investments. We all go to the grocery store and fill our baskets or carts with different foods. Meat, veggies, fruit, snacks and drinks. You cover all your needs that week with that basket of food. Much like that basket of food, investors can cover their investment needs by buying different baskets of investments. These are what we call index funds. 

The most widely used index or basket that streams across our news outlets is the S&P 500. Simply put, this basket measures the performance of the 500 largest U.S. companies. Historically it’s a great basket to measure how the U.S. stock market is doing year to year. It’s also broad, encompassing all economic sectors much like our weekly shopping carts filled with meats, veggies, fruit, snacks and drinks. 

Index funds can also be more targeted; they can be sector specific. If we think back to your shopping cart you might have multiple types of meat, chicken, beef and pork. We can think about that as a sector of the economy. And if it’s a sector that we really like, we might buy more. Health care, technology and energy are a couple of those sector specific baskets that we can buy. 

The whole point of investing in these various baskets is to make sure as investors we cover all our needs to stay diversified. We need to have the right mix of these baskets to ensure we are not taking on too much or too little risk based upon our specific goals. 

Index funds cover everything from U.S. stocks, international stocks, bonds and real estate. Index funds can be a wonderful tool to incorporate into your investment tool kit, help stay tax efficient and be cost conscious. 

Here at Howe & Rusling, we utilize a variety of investment strategies for clients. This includes index funds, individual stocks and individual bonds. Indexing can be an easier, simpler path to achieving diversification for clients without significant assets. Also, it can be a great fit for clients who are more comfortable owning a handful of diversified funds in their account (with indirect exposure to underlying companies), as opposed to directly seeing the fluctuations of the 40-50 individual companies themselves. Put another way, a person might simply prefer an indexed, bucketed 

approach to their investments—and that’s a consideration we value here at Howe & Rusling. Every investor has different needs, objectives, and assets, so there tends to not be a one-size-fits-all approach to building an investment strategy for someone. 

As a Certified Financial Planner, it is my role to help select the appropriate investments based upon your goals. Our team at Howe & Rusling is always happy to answer any questions you may have on these investment topics. Thanks for tuning in and we look forward to our next conversation! 

Disclosures: This communication is for informational purposes only and does not constitute a recommendation, offer, or solicitation to purchase or sell any security or other financial product. The content provided is not intended as investment, legal, or tax advice. Please consult with your financial advisor, attorney, or accountant regarding your specific situation. Investing involves risk, including the possible loss of principal. Index funds are subject to market risk, including the potential for loss of the amount invested, and they may not be suitable for all investors. Diversification does not guarantee a profit or protect against a loss in declining markets. Howe & Rusling, Inc. (“H&R”) is a registered investment adviser with the U.S. Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or training. The descriptions of index funds and other investment strategies herein are intended to be general in nature and may not reflect the specific strategies H&R uses for individual clients. Strategies and investments mentioned may not be suitable for every investor and are provided for illustrative purposes only. Historical performance of indexes is not indicative of future results. Indexes are unmanaged and do not incur fees; an investor cannot directly invest in an index. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. A fee was not paid by either the investment professional or the investment professional’s firm to receive the ranking. The ranking is based upon specific criteria and methodology (see ranking criteria/methodology-to the extent applicable). No ranking or recognition should be construed as an endorsement by any past or current client of the investment professional or the investment professional’s firm.