Kevin O’Leary says ‘you’re actually losing money’ in a bank account — do this simple thing with your hard-earned cash instead

“Right now in a bank account, you’re getting very little [interest],” he says in a recent interview with CNBC. “And inflation is over 6%. So you’re actually losing money every 12 months.”

O’Leary suggests having three months of salary on hand in case of emergency. But after you've built that cushion, O’Leary recommends investing in index funds, which offer an easy and diversified way to get exposure to the stock market.

Here’s a look at three index funds. Each of them focuses on different chunks of the market — own all three and you’re well diversified.

Fidelity ZERO Large Cap Index Fund (FNILX)

The S&P 500 Index is widely regarded as the benchmark index for the U.S. stock market. Several funds track the S&P 500 in order to provide investors with convenient exposure to U.S. equities.

But if a fund wants to use the S&P 500 name, it has to pay a licensing fee that essentially gets passed on to investors.

The Fidelity ZERO Large Cap Index Fund closely mirrors the performance of the S&P 500. But it’s not an “official” S&P 500 copycat, so it doesn’t have to pay the licensing fee. In turn, FNILX boasts an expense ratio of 0%.

Every dollar you put into FNILX gets put to work.

Vanguard Small-Cap ETF (VB)

Small-cap stocks don’t get as much attention as their large-cap counterparts. But investors should ignore them.

The largest companies we see today were once small. Companies with plenty of room to grow have tremendous upside.