When it comes to the foundation of all my investments and where most of my money is invested, it is in stock index funds. The Total Stock Market Index to be specific.
Study after study has shown that this is the best place for the average person to put their money. Dollar cost average your way in and leave your money there for 30 years, and you’ll likely end up a millionaire. It’s that easy, really.
The fee’s are low, and fees play an important part of your total return. The diversification is great because you are literally owning a tiny fraction of all the stocks in the market. It’ll be less volatile than a single stock but that doesn’t mean their wont be volatility.
The returns have historically been quite good and better than using actively managed funds, and better than individual investors trying to pick their own stocks.
It’s easier, cheaper, and gives better returns, so what’s the downside? Nothing really, but it is pretty boring. If you aren’t interested in messing with your finances, and you want little to no maintenance with good returns, this is it. And, there’s nothing wrong with piling all your money into low fee index funds and forgetting it while you let time to its thing.
But, if you enjoy thinking about your finances and thinking of ways to improve your returns, you may want to look at additional options. Even then, you should likely only do this after you have a base of index funds.
My 401k and IRA money goes into index funds. Money I want to invest beyond that, I know give myself additional choices. I can invest in real estate, options, or private start ups. This, for me, is both fun and profitable.
It’s a lot more volatile but that just means there is more potential for profit. Or loss. When it comes to index funds, and how much of your portfolio you allocate to them, it is just a choice you get to make. Ultimately there is no wrong choice (other than not investing at all), just what works for you. I suspect that if you are reading a site like this, chances are you want to do a little more than just invest 100% in total stock market index funds.