Why is a total market index fund the best choice for most investors? A total market index fund is often the best default choice because it gives you the entire stock market in one low‑cost, diversified, tax‑efficient package, with a high probability of beating most active alternatives over time. Broad diversification in one fund A total market index fund owns thousands of stocks across sizes and sectors, representing virtually the entire investable market of a country or region. This breadth reduces the impact of any single company or sector blow‑up on your wealth, lowering portfolio‑level risk compared with holding a handful of individual stocks. Extremely low costs Because these funds simply track an index, they are cheap to run and typically have very low expense ratios, often just a few dollars per $10,000 invested per year. Low fees are a major reason index funds, including total market funds, have his...
Investment and economic observations by N. Russell Wayne, CFP, MBA. Mr. Wayne is the president of Sound Asset Management, inc. and former Managing Editor of The Value Line Investment Survey.