Trying to decide which index funds to invest in can be a daunting task. But the writers over at Kiplinger.com have been gracious enough to provide us with the top 6 index fund picks and the amounts to invest in.
Vanguard 500 ETF (symbol VOO) invest 30%. The Vangaurd 500 invests mainly in stocks of large U.S. companies but also has about 15% of its assets in midsize stocks.
Vanguard S&P Mid-Cap 400 ETF (IVOO), invest 10%. The Vanguard S&P Mid-Cap 400 stocks have achieved better risk-adjusted returns than either large- or small-cap stocks since 1926.
Vanguard S&P Small Cap 600 ETF (VIOO), invest 10%. The Vanguard S&P Small Cap 600 small-cap stocks are inherently riskier than larger stocks, but, over the long term, they’ve produced the best returns.
Vanguard FTSE Developed Markets Index ETF, invest 15%. The Vanguard FTSE Developed Markets Index foreign stocks have stunk in recent years, but history tells us that over time they’ll bounce back.
Vanguard FTSE Emerging Markets Index ETF (VWO) returned a meager annualized 1.6% over the past five years. And that includes a 12.2% gain in 2016. But over the long haul, patience will be rewarded. Put 10% of your investment money here.
Vanguard Short-Term Corporate Bond ETF (VCSH), invest 10%.
This 75% stock, 25% bond mix is a good one for investors 15 or more years from retirement. Remember to rebalance every year or so if the market’s action gets your initial investment allocation out of whack. When you’re within 15 years of retirement, trim your stock ETFs by five percentage points and add that cash to the bond ETF. Repeat that maneuver every five years, until you have about 60% in stocks and 40% in bonds, which is a good allocation for the early and middle years of retirement.