Index Investing for Long-Term Retirement

For the majority of retirement savers, a simple three-fund portfolio of total US stock market, total international stock market, and total bond market index funds beats almost everything more complicated. The reason is fees and behavior. Low-cost index funds keep more of every dollar of return, and a simple plan is one you are more likely to follow through bear markets when complicated strategies tempt you to tinker.

Pick an asset allocation tied to your age and risk tolerance. A common rule subtracts your age from one hundred and ten to get your stock percentage, with the rest in bonds. Rebalance once a year to keep the ratios in line.

Use tax-advantaged accounts like 401(k)s and IRAs first, capture every employer match, and only then move to taxable brokerage accounts. Resist the urge to chase last year's winning sector or hot fund manager. Decades of evidence show that simple, cheap, and consistent beats clever almost every time over a working lifetime.