Benefits of Index Funds for Wealth Building

This document is a guide that outlines how index funds can assist Americans in building wealth. It explains the transformation of investing over the past 50 years, emphasizing the accessibility of diversification at low costs. Index funds are noted for their lower fees compared to actively managed funds, with an average expense ratio of 0.09% versus 0.56% for active funds as of 2024. The guide details the financial advantages of indexing, including significant savings on fees, which have amounted to approximately $570 billion over the past 25 years. It also highlights the power of compounding, illustrating how a $10,000 investment in the Vanguard 500 Index Fund in 1976 could grow to $2 million by 2026. Furthermore, the document describes five key benefits of index funds, including consistent returns, built-in diversification, lower costs, tax efficiency, and clear investment objectives, making them a reliable choice for long-term financial stability.