The 10 Cheapest Index Funds to Supercharge your Portfolio

index fund fees

Where will we find the cheapest index funds?

UPDATE 2:  I’m updating this article to reflect new information coming from Fidelity Investments making significant reductions to the costs of their index funds on August 1, 2018 and changes to Vanguard’s fee structure on December 1, 2018.

Index Funds

Let’s have some index fund fun today.

Many in the Financial Independence Retire Early (FIRE) community  recommend VTSAX (Vanguard’s Total Stock Market Index) as the investment of choice.

Why is that?

It probably has something to do with the blog www.jlcollinsnh.com or the book The Simple Path to Wealth.

If you are in the Choose FI world, then you’ve heard of the Godfather of FI, Jim Collins.

You may know he is a huge fan of Vanguard as the mutual fund company of choice.

Why? 

Does it have the cheapest index fund fees?

Does it have the lowest investment minimums?

It turns out…

It does not.

Then why does he recommend it?

I’ll get to that…

One thing I did the first time I read The Simple Path to Wealth (I ended up reading it about 15 times as his editor on the book) was check all my current investments to find out if I was paying too much in fees.

I’ve always followed the simple advice of Warren Buffett.

Invest in index funds.

I don’t believe investors can or should try to beat the market.

Read moreThe 10 Cheapest Index Funds to Supercharge your Portfolio

Why Timing the Market is a Bad Idea

Here are the headlines that I saw when I googled “stock market” today:

 

“Is a global recession led by a US Stock Market crash in the offing?”

“Dow slides as US stock market suffers worst week in two years”

“Chart analysts see bigger market pullback if interest rates continue to shoot higher”

 

These headlines are going to affect everyone differently.  Let me share with you how it affects me.  Normally, I would never read it.  But today,

I laugh at it.

It’s useless information.

Let me give you a little background on me.

I worked for Fidelity Investments as a stock broker while I was in college before I joined the military.  I’m an avid finance nerd and real estate investor.

I’ve studied the markets long enough to know that index funds are the smartest way to invest your money.  Trying to beat the market is pointless.

I also know that a lot of what you see in the financial media space is useless information.  They try to predict where the market is going.  When they get it wrong, they try to explain logically why they got it wrong, which ends up being the perfect definition of hindsight bias.

Hindsight bias, also known as the knew-it-all-along effect or creeping determinism, is the inclination, after an event has occurred, to see the event as having been predictable, despite there having been little or no objective basis for predicting it.

Financial magazines, newsletters, cable programs, videos, it’s all meant to capitalize on either fear or greed.  A few weeks ago, it was greed.  The markets were kicking ass.

Read moreWhy Timing the Market is a Bad Idea

What should I teach my kids about money?

I love all things money.  My kids often see me reading finance books and browsing real estate blogs.  They hear me talking about money with my wife.  They watch us negotiate deals to buy houses with cash, and they overhear our discussions on retiring early.

I explain what I’m doing with money in simple terms to my kids, but I can’t be sure it’s sinking in.  They are 10 and 6.  It is my job to prepare them to navigate money and life.  I wonder how I’m doing.

Read moreWhat should I teach my kids about money?

How I Achieved a PERFECT Credit Score!

How does one get a perfect credit score?  I’m in the military. People around the office ask me for for financial advice. They know I’m a “money guy” and word gets around that I like talking investing and real estate.

I warn people they won’t like my advice. They usually don’t.

This guy didn’t.

Recently a co-worker told me he’s got $20,000 burning a hole in his pocket, and what I think about investing in the British Pound. With the Brexit, it seems like a sure thing!

I told him this kind of speculation in currency isn’t for everyone. Even those who devote their lives to studying this are wrong more often then right. I warned him this would be a fun way to lose money quickly on something he doesn’t understand. It seemed like he took that to heart.

Guy: “Ok, I got a better idea! What about gold!?!?!?”

Read moreHow I Achieved a PERFECT Credit Score!

You Are Not Awesome at Picking Stocks!

Think you are good at picking stocks?

To illustrate how un-awesome you are, let me first share how awesome I am.

When I was just getting started out investing in 2001, I put all the money I had, $4,000, into an index fund. I called my bank and said put it in the S&P 500 index. Warren Buffett taught me well.

The savvy salesmen on the other end of the phone who was clearly more experienced than Warren told me I was crazy to invest in that. I could make money twice as fast if I invested in their aggressive growth fund.

NOW I’M AWESOME!!!!!!

Read moreYou Are Not Awesome at Picking Stocks!

You did WHAT with your IRA?!?

How and Why I bought rental properties in my IRA

Yes, I may have done something stupid.

I certainly did something unique.

I sold all the investments in my IRA and bought rental properties! (My Wife’s too!)

The rental properties are held in the Roth IRA as investments, and the rental income accumulates as cash inside the IRA.

And I’ll show you how it made me FILTHY RICH!!!

I did it, and you can too!!!!!

filthy-rich

Read moreYou did WHAT with your IRA?!?

What Beer Teaches Us About Money

I’m going to reference two awesome books in this post. They are must-have’s if you want to know money.   They are books by finance blogger Jim Collins (http://www.jlcollinsnh.com) and a trader turned probability expert and essayist, Nassim Taleb.

Why would I talk about both of these books in the same post.

Simple.

Reading both gives you almost everything you need to understand money. Damn close anyway.

Beer and Foam

Jim Collins book The Simple Path to Wealth has a section I love where he compares the stock market to a glass of beer. These glasses contain different amounts of beer and foam.

If you use a little skill to pour the beer, you can have a glass full of mostly beer with very little foam on top.

Pour the beer too quickly, you’ll have mostly foam and very little beer.

What if somebody else pours your beer into a mug that you can’t see through and then hands it to you. You have no way of knowing how much is beer and how much is foam.

The same problem exists with the stock market.

Read moreWhat Beer Teaches Us About Money

How Lucky are the Richest Guys on Wall Street?

This post is based on and inspired by ideas from the book Fooled by Randomness by Nassim Taleb. It’s one of the most insightful books I’ve ever read.   It’s about the role of chance in life, and how we are often blind to and fooled by it.

Get it and read it.

It ESPECIALLY applies to money and the markets.

The points I make in this post are derived from his book.  Here we go:

Russian Roulette

Have you ever played Russian roulette?

I have.

water-balloon-russian-roulette

I’m kidding. I haven’t.

          Why not?

 Because that’s stupid!

Because as exciting as it sounds, I just can’t stomach the worst possible outcome. It’s not an acceptable risk. Not even to play once.

No matter how smart I am (or how smart I think I am), the outcome is ruled by randomness. By chance.

Read moreHow Lucky are the Richest Guys on Wall Street?

The Best Damn Finance Book I’ve Ever Read

First, a little about me and my website:

  • I paid off $32,000 in student loans in a year.
  • Paid off our $280k mortgage in 6 years.
  • Flipped several houses in Washington D.C. to help me build income for real estate investing.
  • Purchased twenty rental properties with cash.

My website is all about helping others to get out of debt and create passive income from real estate.

But you can not mess with real estate until your finances are straight.  You gotta go get Jim’s book! (or at least read his website)

cover graphic

“Spend less than you earn–invest the surplus–avoid debt”

The central theme of Jim’s website and book.

It’s hard to believe the Path to Wealth can be this simple.

But in his book, you’ll see it is.

I got to admit. I love this book! My review is going to sound a little over the top, but it’s a damn good book!

I’ve been big into finance and real estate books my whole life. I’ve read them all.

stack of books

Ok, way more than this!

About a year ago, I stumbled across financial independence and early retirement websites and it opened up an entire new world to me!

I began seeking out all the top blogs in this field, and one that kept coming up was jlcollins.com.

To put it bluntly, his Stock Series was the most comprehensive explanation of investments I have ever read. There is so much noise and confusion out there in the finance world, and he slices right through it and tells you what’s really important.

He makes it easy to understand the complex world of money. His approach to investment is so simple, it’s alarming!

I followed his blog closely and eagerly awaited new posts.

When he sent out an email explaining he was writing a book and soliciting help from his readers for proofreading, I jumped at the chance!!

The only reason I volunteered was because I wanted to read the book ASAP!!!

As luck would have it, I was selected to be a proofreader, and had the opportunity to read the book before publication. (Actually, I’ve read it about 20 times. Occupational hazard!)

The book is exactly what I was hoping it would be.

Read moreThe Best Damn Finance Book I’ve Ever Read