Preparing for Retirement
Part 3: Which Investments Should I Choose?

Part 3: Stocks? Bonds? Mutual Funds? International?
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Saving for Retirement: Part 3
Which Investments should I choose for Retirement?

This is the subject of a multi-billion dollar money management industry that manages over $20 Trillion. 

So why should you listen to some guy on the internet who is not certified in investment management or advice?

Mainly because I have nothing to gain from what I tell you, unlike most money managers and investment advisors. In fact, the vast majority of financial advisors are not fiduciaries which means they are not even bound to advise you on the best thing for you! They are merely required to advise you to invest in investments that are suitable for you and your investment objectives even if other investments would have dramatically lower fees and save your hundreds of thousands of dollars over your lifetime. Nope. They have every legal right to push you toward an investment that pays them or their firm a higher commission even if that will hurt you.

So should you hire an investment advisory who is a fiduciary? 

Maybe. But don’t let keep you from getting started.

Most people get paralyzed by trying to figure out the most optimal way to invest their money. This paralysis can lead to two very bad decisions: 1. Delaying saving (worst possible outcome) or 2. Keeping all your money in “safe” investments like cash and money market accounts (almost as bad). Cash is not safe because keeping your money in cash guarantees that inflation will erode its buying power.

So, I strongly recommend you read the book: The Simple Path to Wealth by JL Collins. In the book, he lays out a very clear argument about why everyone should invest the total US Stock Market while they are working and the total US Bond Market while they are not working. It’s slightly more nuanced than that but that’s the basic picture. If you are reading this and you need to decide what to invest in, here are your top choices:

  1. VTSAX, The Vanguard Total Stock Market Index Fund.

  2. Any “total market” or “S&P 500” index fund that has an expense ratio under 0.50%

If you desperately need something more complicated than that, do this: Take your age and divide by 2. Turn that number into a percentage and put that into VBTLX, The Vanguard Total Bond Market Index Fund.

By way of example, if you’re 30 years old…30 / 2 = 15. Put 15% in VBTLX and the rest in VTSAX.