Invest in an indexed fund

An indexed fund is a large fund that is benchmarked against the market index. The fund manager's job is to make investments to follow the components of the market index. This is also called "passive investment".

The advantages of an indexed fund are:

- it is usually a very large fund
- it is well diversified
- the annual charge is very low, maybe 0.5% or less

The fund manager can keep the charges at a low level, as they do not have to pay analysts to study the individual stocks. They just invest mainly to follow the market index.

Studies over the past years have shown that, by investing in the index, the results are better than the average performance of actively managed funds. This is probably due to the low fees and transaction costs.

If you invest in an indexed fund, you do not have to worry about how to pick the right managers. This reduces another challenge.

Many experts have recommended the consumers to invest in the indexed funds.

NOTE: An indexed fund with low charges is not available in Singapore today. But, I expect it to be available in the near future. Watch out for it.