Why my investment strategy is not based on index funds a heterogeneous fool

Your regular retirement savings should not be kept in cash. If you follow this path, you will not be in a hurry to save money to cope with inflation. The result? You will see that you are making money in your life and your long-term goals may be in jeopardy.

Instead, it is important to use the money saved for retirement and other purposes. And from this point, you can easily decide on index funds .

Index funds are designed to replicate and match the performance of the indices on which funds are held. The S&P 500 Index Fund, for example, aims to do more than the S&P 500 itself.

Index funds are a really good choice for the average investor, and that's not my opinion. Investment giant Warren Buffett has long regarded the Index Fund as an excellent way for investors to increase their wealth.

But my personal investment strategy does not revolve around indexing. Because here.

1. I am comfortable with stock options.

Index funds are a good choice for those who don't know much about single stock or don't want to go that route. Although I don't have the same stocks as some investors, I probably know better than ordinary people. Based on my knowledge, I feel comfortable in valuing stocks and choosing which private companies to invest my money in.

In fact, I was ready to take the time to research different companies before entering. Some people may not have the desire or patience to do so, and it doesn't matter. Because I regularly spend my time reading stocks (sometimes just for fun), I may be investing in private companies.

2. I want a portfolio with market potential

Index funds have a number of disadvantages, one of which is that they do not allow you to dominate a larger market in your portfolio. As mentioned above, index funds want to perform better with the following indices, but their goal is not to defeat them.

In turn, I have slightly higher goals. My goal is to create a portfolio that works better, at least from a wider market. To achieve this, I need to bring my investment mix together.

3. I have options in my scholarship plan.

People who save on an employer-funded 401 (k) plan are often limited to cash options, unlike individual stocks. But since I have a different type of 401 (k) - only one 401 (k) - I do not have this limit. Instead, I can invest my long-term savings in private property, and this is the choice I have made to move on.

Which is the right choice?

There is nothing wrong with using the Index Fund as an investment for retirement and other long-term purposes. But I have reason to choose from a number of stocks that I believe have strong growth potential .

But one thing to keep in mind is that you don't have to choose between index funds and individual stocks. Investing in both can make you richer and make your portfolio more attractive and diverse.