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Intimidated by the Stock Market? Try Trading Index Funds. Phil Town gives a run-down of where index stocks can benefit and hurt your investments.

By Phil Town

Opinions expressed by Entrepreneur contributors are their own.

In this video, Entrepreneur Network partner Phil Town breaks down the complex nature of investing in index funds.

If you're somone who does not want to learn how to invest, Town says you may choose to buy index stocks. Town describes indexes as surrogates to how well the market is doing, known to many as the Dow Jones Industrial Average, S&P 500 and the Nasdaq.

One of the benefits of buying index stocks is their traditionally low fees. Unfortunately, they can also set up a messy cycle assocaited with valuation. When people buy index stocks, fewer and fewer people are made aware of a stock's real price that is reflective of the market. This suppression of price discovery, or finding the right price for the right value, can result in some strange consequences.

Town mentions this type of investing relies partially on greed, fear and volatility.

To learn more about this style of investing, click play on the video.

Related: What Will Happen to Your Wealth After You Die?

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Phil Town is an Investment Advisor, Hedge Fund Manager, 2x New York Times Best-Selling Author of Rule #1 & Payback Time, and Ex-Grand Canyon River Rafting Guide. Rule #1 Investing is Warren Buffett style investing, teaching you how to buy businesses on sale, with little risk and 15 percent returns. In fact, Rule #1 investing is practically immune to the ups and downs of the stock market.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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