Keeping it Simple Stupid. My brain likes simple things; like watching ALF reruns and eating ice-cream right out of the container. I don’t need to add any complexity to my busy life. Being able to set my investment choices and ignore them is a great thing.
I use no-load stock index funds for a decent portion of my Roth 401k and Roth IRA’s. Plus a few select individual stocks.
Advantages of Index Funds:
- The yearly costs are dirt cheap compared to managed funds.
- Very few managed funds beat indexed funds.
- They simplify your life. Setup a few funds and just check on them once or twice a year to re-balance your asset allocation.
- They stop you from chasing returns. And buying and selling at the wrong times.
- Index funds are tax-efficient. If you do own stocks in taxable accounts index funds will prevent you from giving Uncle Obama more money than you have to.
- All the major investment companies offer them; Fidelity, Vangaurd, Schwab etc…
You can use just 3 funds and create a portfolio that you can pretty much ignore. Here is an example for informational purposes only.
- A Total US Stock Market Index Fund
- A Total International Stock Index Fund
- A Total Bond Market Fund
So, a basic “three-fund portfolio” might consist of 60% Total Stock Market Index, 20% Total International Stock Index, and 20% Total Bond Market fund.
If your company 401k doesn’t offer index funds, talk to your HR department about getting some added.
Every 6 months I re-balance my portfolio to make sure I am still investing the way I want. Using the word “portfolio” makes it sound like I have lots of money to invest, I don’t, but I like using the word anyways.
Important-the above is how I do things. Everyone’s situation is different. Please do your own research and decide what is best for you.