How Much of Your Portfolio Should Be in Index Funds?
Yahoo Finance ·
If you're reading this, then you obviously have at least some interest in owning index funds like the SPDR S&P 500 ETF Trust ( SPY 0.17% ) or the Vanguard S&P 500 ETF ( VOO 0.15% ) , which are meant to mirror the performance of S&P 500 index ( ^GSPC 0.01% ) . Smart choice. You likely realize that beating the market is not only difficult (to the point of being unlikely), but time-consuming as well. Simply owning a sizable slice of the broad market solves both problems. The question is, how much of your portfolio should be allocated to these super-simple holdings? The answer, unfortunately, is a resounding "it depends." It depends on your investment goals, your interest in also holding individual stocks, and often, your risk tolerance. Here's the good news, though... there's no wrong answer. Plenty of investors have allocated 100% of their portfolio to index funds, and are not only achieving good long-term returns, but aren't feeling compelled to keep constant tabs on their investments. They're the ultimate passive buy-and-hold-indefinitely allocation.
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