Scared to Invest in Stocks? Here’s 1 Good Solution for You | Smart Change:

The beauty of index funds is that they take a lot of that guesswork out of investing. As the name implies, index funds simply aim to track the performance of the market indexes they’re tied to. An S&P 500 index fund, for example, will try to mimic the performance of the S&P 500 itself, which is an index comprised of the 500 largest publicly trading companies.

When you buy index funds, what you’re really doing is investing in the broader market; you’re not putting all of your eggs into a number of smaller baskets and simply hoping for the best. And, index funds offer built-in diversification, especially if you choose the right index to follow.

What’s the catch? Well, there’s a minor one. Index funds aren’t designed to beat the market; they’re simply designed to match its performance. If that’s not good enough for you as an investor, then you can’t just fall back on index funds. Rather, you’ll need to research and hand-pick stocks, or consider putting money into actively managed mutual funds, which charge much higher fees than index funds and don’t always outperform them. But if you’re nervous about investing, especially given the volatile year the stock market has had, then index funds could be a good bet. This particularly holds true if you’re fairly new to investing and haven’t yet landed on a specific strategy.