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Originally Posted by Tuco

Hello, I am Tuco, a beginner investor.

I am 22 years old and currently have $30,000 of money in the bank/checking account/mutual fund. I currently save roughly $2000 a month because of my job and lack of financial obligations. 9% of my salary goes into my 401k account (This is the max that is matched 75% by my company) I have $14,000 in student loans with an 7.5% interest rate. My car is paid off, I have no mortgage, credit card debts etc. In 2-3 years I am looking to buy a house. My goal is to get enough money for a sizable down payment on said house, at least 20%.

I have been looking towards investing my money better but am relatively clueless about what to do. I have looked at stocks, bonds, mutual funds etc, and the little I've read has pointed towards Index Funds as being a reliable way to earn money.

I understand index funds as a large mutual fund that collects all the stocks in an index of a financial market. I've been namely looking at Vanguard 500 simply because I don't know any better.

I am not planning on putting all my savings into an Index Fund, but for the purposes of maximizing both my long term wealth and the next 3 years of getting my down payment for a house it appears that an Index Fund might be valuable. I see that people report Index Funds as typically getting 11% growth per year, outperforming most mutual funds.

1. Is an Index Fund as good as I have stated?
2. Is now as good of a time to invest in an Index Fund as any?
3. Are there any other ideas for how I could invest my money for the next 3 years before I sink it into a house (If that's the route I go).

3 years as far as the stock market is concerned, is SHORT-TERM. In that case, do not invest in stocks if you're going to need it in that time frame. What you should look at are some 3year GICs. Park all your money in it and then use it to buy your house. If you are adament on buying your house in less than 5-years, putting it into index funds could be risky. Market fluctuations balance themselves out and average out much higher than what GICs can deliver, but that's over the long-term.

After you've purchased your house, then yeah invest in index funds. You don't need any knowledge about the market and it provides a good return (over the long term).

I personally buy individual stocks and mutual funds for my international exposure (20%) as I don't know much about those companies and don't want to be raped by forex exchange.