Making money on the stock market can be a very daunting task. If you want to invest in individual companies you have to do research to make sure that the market likes the company and that the company is actually profitable. Another option you can try is investing in the stock market with index funds. "Buy low and sell high" and "Diversify" are the two main rules of investing. "High" and "Low" are speculative terms but "diversify" is simply buying multiple companies in various markets. You may invest in fast food, banks, and retail stores or simply a variety of fast food companies. The theory is that if you put your money in a variety of companies the number that do well will make up for the ones that don't.

Researching one company is difficult enough. Multiply that work by the number of companies in your diverse portfolio. This is where indexes come in. Indexes are created by investment firms and contain a variety of companies which are bought and sold based on various computer models. Many of them have little to no human input. This can reduce the cost of purchasing them because there is no broker required to manage your portfolio. Companies which create and offer these indexes create the computer models to try to bring in a consistent return regardless of the performance of the stock market as a whole.

A common index which many other indexes are based on is the S&P 500. The S&P 500 is a collection of 500 large cap companies which are selected to accurately sample the market as a whole. When you buy a share of the S&P 500 you are actually buying various amounts of 500 individual companies. Indexes tend to be rated on their ability to under perform, match, or out perform the S&P 500. When picking an index to invest in you want to go with one that has a proven track record of returning a profit.

The other thing to consider when investing in the stock market with index funds is what investment firm to go with as they may not all offer the same indexes and may not all charge the same amount to invest. Some indexes require minimum initial investments which can be thousands of dollars. Some indexes require that you be a client of the company that created the index. Some may even require regular deposits to invest with.

Investing in the stock market with index funds can greatly simplify the investing process. All the diversity and "buy low, sell high" logic is running behind the scenes. All you have to do is invest in a single index and if you do have to pay a commission it's only for one trade rather than the hundreds that the index represents. When investing in indexes, typically a regular investment schedule is set up and you don't even have to pay attention to it. When you retire you then have your nest egg to live on.