Simple Investment Choices

You’ve built your cash cushion, handled expensive debt, and opened the right accounts. Now: what do you actually buy inside those accounts?

The answer is simpler than the financial industry wants you to believe.

The Core Idea: Index Funds

An index fund is a fund that owns a little bit of everything in a market index. Instead of trying to pick winning stocks, you just own the whole market.

Why this works:

Over any 20-year period in history, the broad stock market has produced positive returns
85-90% of professional fund managers fail to beat a simple index fund after fees over 10+ years
You don’t need to research individual companies, time the market, or make trading decisions

Fees: The Silent Wealth Destroyer

Every fund charges an expense ratio (ER) — an annual percentage fee deducted from your returns. The difference between a cheap fund and an expensive one is enormous over time.

Fund type	Typical expense ratio
Broad index fund (VTI, VXUS, BND)	0.03-0.10%
Target date index fund	0.10-0.15%
Actively managed fund	0.50-1.50%+

See the Impact

Fee Impact Calculator

Starting amount Annual return (%) Years Low fee (%) High fee (%)

Low fee (0.03%) final

$997,914

High fee (0.75%) final

$816,430

Lost to fees

$181,484

The rule: target expense ratios below 0.20% for stock funds and below 0.10% for bond funds.

ETF vs Mutual Fund

	ETF	Index Mutual Fund
How you buy	Like a stock — any time during market hours	Once per day at closing price
Minimum investment	Price of 1 share (often $50-400)	Often $1,000-$3,000
Tax efficiency	Slightly better (in taxable accounts)	Slightly worse
Automatic investing	Harder to automate	Easy recurring purchases

Bottom line: The differences are minor. Don’t let this decision slow you down.

Why International Diversification Matters

The U.S. stock market represents roughly 60% of the total world stock market. Investing only in U.S. stocks means you’re betting the U.S. will always outperform. Sometimes it does (2010-2024). Sometimes it doesn’t (2000-2009).

A fund like VT (Vanguard Total World Stock ETF) owns the whole world in a single purchase: ~60% U.S., ~40% international. Expense ratio: 0.07%.

The Missing Piece: Bonds

Total stock market funds are 100% equities. For many investors — especially those within 10-15 years of needing the money — that’s too aggressive.

Bonds are loans you make to governments or corporations. They pay interest and are generally less volatile than stocks.

A common rule of thumb: your bond allocation ≈ your age minus 20 (so a 40-year-old holds ~20% bonds).

Build Your Allocation

Portfolio Builder

Your age 30 years old Risk tolerance Moderate

US Stocks (VTI) 48%

Intl Stocks (VXUS) 32%

Bonds (BND) 20%

Based on the "110 minus age" rule, adjusted for risk tolerance. Fund tickers are examples — comparable funds exist at Fidelity, Schwab, and other brokerages.

Simple Portfolio Options

From simplest to slightly more hands-on:

Option 1: Target Date Fund (Simplest)

A single fund that automatically adjusts as you age. Pick the fund closest to your expected retirement year.

Example: Vanguard Target Retirement 2060 Fund — ~0.08% ER
You do: Buy it and contribute regularly. That’s it.

This is the 85% Solution in its purest form.

Option 2: One-Fund Global Equity (VT)

All-stock, all-world: VT — 0.07% ER. Simple if you’re young and decades from retirement.

Option 3: Two-Fund (VT + BND)

Global stocks plus bonds in whatever ratio matches your age: VT + BND (0.03% ER).

Option 4: Three-Fund Portfolio

The classic Bogleheads three-fund portfolio: VTI (0.03%) + VXUS (0.07%) + BND (0.03%).

See Your Money Grow

Compounding Calculator

Starting amount Monthly contribution Annual return (%) Years 30 years

Total contributed

$190,000

Growth from returns

$664,537

Final balance

$854,537