One of the most difficult things about investing is finding the time to do it. Most people work full-time jobs and have family and other commitments in the evenings and on weekends. Therefore, they may feel as though they are simply unable to give investing the time it needs. After all, how to invest your hard-earned cash is a very important pursuit.
However, this doesn’t tell the full story. That’s because it is possible to give just 10 minutes a month and build a well-diversified portfolio of shares. Those shares could make you a millionaire in the long run.
Tracker funds
The way to invest on a restricted time budget is to buy tracker funds. They attempt to mimic the performance of a specific index (for example, the S&P 500 or FTSE 100) for a relatively small fee. Although their performance may not perfectly mirror the index they follow, the tracking error is normally relatively small and makes only a minor difference to overall performance.
Similarly, the cost to hold a tracker fund is much less than for an actively managed fund. Unlike an actively managed fund, a tracker fund does not seek to beat an index. Therefore, it does not require an expensive research team which has the task of seeking out alpha opportunities. This means that annual costs are normally 0.3% of your investment or less. Because you are not buying or selling individual shares, you save on commission costs and the bid/offer spread.
Performance
Clearly, every investor would love to beat the index. However, for investors who have next to no time to do so, a tracker fund still offers stunning performance. For example, the S&P 500 has risen from 524 points 30 years ago to 2,165 points today. That’s an increase of over four times and doesn’t even take into account dividends received each year.
It’s a similar story with other indices across the globe, which means that tracker funds can perform exceptionally well. That’s especially the case when dividends are reinvested and compounding takes effect.
Time
Once you have picked the tracker fund(s) you wish to invest in, there is really very little for you to do. The fund manager will administer all dividends and usually they are paid quarterly or bi-annually into your account. Similarly, you can choose to set up a standing order each month to invest in the fund. All of this is unlikely to take more than 10 minutes per month, and yet if you keep it up over a long period, it could make you a millionaire.