Strategy · Passive

INDEX INVESTING

BullishDefined riskBeginner

Overview

Buying and holding broad market index funds (S&P 500, total market, international) to capture overall market returns with minimal cost and effort. Beats the majority of actively managed funds over long periods.

Setup

1.Open a tax-advantaged account (401k, IRA, Roth IRA) first.
2.Choose low-cost index ETFs: VTI (total US), VOO/SPY (S&P 500), VXUS (international), BND (bonds).
3.Allocate based on risk tolerance and time horizon (e.g., 80/20 stocks/bonds at 40 years old).
4.Automate monthly contributions.
5.Rebalance annually to maintain target allocation.

Max profit

Matches the index return minus minimal expenses (0.03-0.10% expense ratio).

Max loss

Full investment in a total market collapse scenario; historically markets always recover to new highs.

Breakeven

Purchase price.

When to use

For virtually all investors as a core portfolio strategy. The simplest path to wealth-building with the highest statistical probability of beating active managers.

When to avoid

Never completely — but can be combined with tactical strategies for portion of portfolio.