The 15 Minute Investment Portfolio

I've written before that two of the reasons I invest in index funds are because they take little time and not much effort. (Besides, they come highly recommended by people who manage billions and investment pros.) Well, it appears that I'm not alone in feeling this way as Money magazine concludes that index fund investments are simple, inexpensive, and offer solid returns. Their thoughts on an index fund-based investing plan:

I like the simplicity of the approach (which makes it more likely you'll stick with it), as well as the focus on index funds (which keeps your costs down and returns up). And I think this strategy is certainly a better idea than devoting all your money to any one of those choices-or putting it in any single investment, for that matter.

So what do I recommend instead? Simple. Just divide your money among three funds: a total stock market index fund, a total international stock-market index fund and a total bond market index fund.

I'm in the process of simplifying my investments as part of the investment review I'm conducting this year (I'm almost done -- should be completed by the beginning of March or so). As you can see from that post, I'm trying to get down to a lot fewer funds, but it's going to take me some time to get to just three -- I'm hoping to get "down" to "only" 45 by the end of the year. ;-)

Comments

[Bill Bradle]

My son is 24 and I put his 401(k) into a S&P Index, international index and small cap index figuring he could skip the bonds for now.

[Bored]

63? holey shamolies! Now I don't feel so bad! :P

The reason I got into the PFblogosphere (PF BoS?) was to benchmark my personal finances with others in the same situation...so I'm glad I saw your post today since yours is a similar situation to mine. (minus about 40 funds...ok I'll stop! :) ). I am also just starting to move toward index investing, for the benefits you mention above.

I fought indexing for so long, figuring (praying) I'd be able to beat the market, to no avail. So like you, I'm giving in to the power and simplicity of indexing.

Tax deferred/free accounts are easy to do (although I haven't done mine yet...must...stop...being...lazy), but its the taxable ones that I can't seem to let go of, because of the tax consequence.

The PF BoS has already proved its value to me, since I can see I'm not the only one racking my brain over issues just like this. I'll be sure to benchmark / follow you progress.

You made my day!

Good luck, index away! :D

[Phil]

Bill,

I'm 26 and will probably forgo bonds for the near future. I have a HELOC (as part of an 80/15 mortgage) that has a negative yield of 8%, so I figure any potential bond money should go into this instead.

[Steve]

I read 2 great books recently:
1. Investing For Dummies
2. Mutual Funds for Dummies

I have 10 Vanguard Mutual Funds
5 index / 5 Managed.
30% Bonds / 35% Domestic Stock / 35% Intl Stock

Index Funds - Non-Retirement
Managed Funds - Retirement

Now I'm a Dummy and proud of it!!