I use no-load stock index funds in my 401k, HSA and Roth IRA's for the bulk of my investing. Plus a few select managed funds.
Advantages of Index Funds:
- The yearly costs are dirt cheap compared to managed funds.
- Very few managed funds beat indexed funds.
- They simplify your life. Setup a few funds and just check on them once or twice a year to re-balance your asset allocation.
- They stop you from chasing returns. And buying and selling at the wrong times.
- Index funds are tax-efficient. If you do own stocks in taxable accounts index funds will prevent you from giving Uncle Obama more money than you have to.
- All the major investment companies offer them; Fidelity, Vangaurd, Schwab etc...
- A Total US Stock Market Index Fund
- A Total International Stock Index Fund
- A Total Bond Market Fund
If your company 401k doesn't offer index funds, talk to your HR department about getting some added. My plan has some but we are switching to a new plan on October 1st that has lousy choices as far as I can tell. I will have to figure out what are the best of the mediocre choices I will now have.
I have a few specialty funds that I have added to the mix over time, for diversity sake, but they aren't necessary.
Every 6 months I re-balance my portfolio to make sure I am still investing the way I want. Using the word "portfolio" makes it sound like I have lots of money to invest, I don't, but I like using the word anyways.
Important-the above is how I do things. Everyone's situation is different. Please do your own research and decide what is best for you.