4 ms·

Is buying an index fund the same as planting a tree? The odd thing to me, that I still havent been able to wrap my head around, is that it's no work at all. It

• tjohns 2y ago
  For the purposes of this analogy, yes. The "work" is losing access to your money. You're foregoing the ability to buy nice material things today, in exchange for investing in a business so that they can use your funds to do something productive with it instead. Real work does actually happen at other end of the exchange. On top of that, there's the risk that a business you invest in might fail, and you lose all of that money permanently. You earn a premium for accepting that risk. After 10+ years (market downturns historically can last up to a decade, so you need to be prepared not to access your funds for a long while in the worst case) you can start getting that money back. That's the fruit from the tree. The only thing that's different is that with an index fund is that you're investing in hundreds of companies, rather than individual ones. Which you should be doing anyway in order to mitigate the risk of any one company failing.
• triceratops 2y ago
  You (usually) have to work to earn the money in the first place.