Good Money Blog

Many retail investors (like you and me) believe that they can beat the market in the long run by market timing. While underestimating the risk they’re taking by trading just a couple stocks, they are confident that they can perform better than fund managers or even Warren Buffett. Nevertheless, Buffett suggested that most investors are better off putting their money in low-cost index funds.

Money Magazine highlights the following great low-cost index funds in “The only 7 investments you need“:

1. A blue-chip U.S.-stock fund: Fidelity Spartan 500 Index (FSMKX)
2. A blue-chip foreign-stock fund:  Vanguard Total International Stock Index (VGTSX)
3. A small-company fund: T. Rowe Price New Horizons (PRNHX)
4. A value fund: Vanguard Value Index (VIVAX)
5. A high-quality bond fund: Vanguard Total Bond Market Index (VBMFX)
6. An inflation-protected bond fund: Vanguard Inflation-Protected Securities Fund (VIPSX)
7. A money-market fund: Fidelity Cash Reserves (FDRXX)

For such a simplified portfolio, 3 simple plans for different age groups are demonstrated in “Where to hold your investments“: