Index funds have boarded ships and airplanes to find happy homes outside of the United States. In this section, I’ll give you examples of how to build a portfolio of index funds whether you live in the United States, Canada, Great Britain, Australia, or Singapore. Feel free to check out the section relating to your geographic area, or read with interest how our international brothers and sisters can create indexed accounts. Even if you live in a country not mentioned here, as long as you have the ability to open a brokerage account in your home country, you can build a portfolio of indexes.
This chapter shows how to invest on your own. Going solo is the cheapest (and potentially most profitable) way to invest in index funds. It’s simple. But if hell has to freeze before you go solo, you’ll prefer the next chapter. It describes how to get help through a financial advisory firm.
Still with me? Great! Before getting into the profiles of some real people and how they’re investing, let’s answer a few important questions.
What’s the Difference between an Index Fund and an ETF?
Index funds and ETFs (exchange traded funds) are like identical twins in the same royal family. If they wore t-shirts they would say “Same Same” on one side, “But Different” on the other. They each contain stocks that track a given market. For example, the Vanguard 500 Index fund (VFINX) is an index fund that holds 500 large American stocks. It’s available ...