this post was submitted on 05 Sep 2024
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How to choose mutual funds to invest in (lemm.ee)
submitted 10 months ago by scytale@lemm.ee to c/personalfinance@lemmy.ml
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I've been on an HSA+HDHP for a couple of years now and only realized recently the interest earned from investing HSA money is also tax free, so I want to start investing a part of my savings and see how it goes. I have 2 options, Betterment or Mutual Funds. I figured I'd try the latter to avoid fees, but I'm not sure which funds to choose. My HSA currently provides 30 fund options.

I see people mentioning Vanguard a lot so I spread out my initial investment into 25% chunks across 4 different Vanguard funds. How did I choose them? Well I literally just looked at the performance graphs and selected the ones that historically went up steadily without major dips. As a total noob, how can I improve my choices? Is there a simple way to decide without having to dive deep into the stock market?

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[โ€“] sugar_in_your_tea@sh.itjust.works 1 points 10 months ago* (last edited 10 months ago) (1 children)

Yup, VFIAX (the Vanguard S&P 500 index) is what everyone is saying.

Here's what you're invested in:

  • VFIAX - S&P 500 fund; 500 biggest companies in the US
  • VEIRX - basically a "value" tilt version of the S&P 500, but with far fewer companies (~200 vs 500)
  • VSMGX - conservative, properly diversified fund - 60% in stocks (diversified with international stocks), 40% in bonds
  • VUSXX - basically cash

So overall, here's what you're looking at (back of the napkin math):

  • 35% - cash and bonds
  • 55-60% - US stocks
  • 5-10% - international stocks

So you're pretty lightweight on international stocks.

Personally, here's what I'd invest in:

  • VITSX - Total US market, meaning there are smaller companies in there as well; 85% of it is the same as the S&P 500, so it's not that different, but small companies have historically done better than big companies, so it's good to have some of that exposure
  • VTMGX - pretty much total international market

To be evenly diversified globally, you'd do something like 60% VITSX and 40% VTMGX, but I personally think the US will outperform, so I do 70% US and 30% international.

If you're risk-averse and feel like you'd sell if there's a market downturn, you can add some bonds (VBTLX) and put something like 10-20% in it (assuming you're young-ish; if you're over 50, increase it to 30-40%). But honestly, there's not much point if you'll just set it and forget it. If you want something super simple, VASGX looks pretty decent (20% bonds, so a bit less extreme fluctuations in a downturn).

A lot of people honestly just go 100% S&P 500, because a lot of those companies do business in other countries, so you're kind of getting international exposure. I personally prefer explicit international exposure though, hence my recommendation.