Beginner-friendly guides to investing, risk, diversification, stocks, mutual funds, and long-term wealth building.
Choosing between target date funds and index funds can feel confusing because the two options are not exact opposites. A target date fund is a complete portfolio that automatically adjusts its asset allocation over time, while an index fund is a single investment designed to track a particular market index. In fact, many target date…
A Treasury bill ladder is a portfolio of U.S. Treasury bills with different maturity dates. Instead of investing all your money in one T-bill, you divide it among several bills that mature at scheduled intervals. As each bill matures, you can: Spend the proceeds Move the money to another account Reinvest it in a new…
A bond ladder ETF strategy uses exchange-traded funds with different target maturity years to spread bond maturities across a schedule. As each ETF approaches its designated termination date, its bonds generally mature or are called, the portfolio shifts toward cash and cash equivalents, and the fund eventually distributes its remaining net assets to shareholders. This…
A three-fund portfolio typically combines a broad U.S. stock market fund, a broad international stock market fund, and a broad U.S. bond market fund. The funds themselves can remain the same throughout an investor’s life. What may change is the percentage allocated to each fund. A younger investor with decades before retirement may choose a…
Many investors review their 401(k) allocation once or twice a year. Another approach is to rebalance when an asset class moves a predetermined amount—such as 5 percentage points—away from its target. Neither method is automatically right for everyone. How often you should rebalance your 401(k) depends on your target allocation, retirement timeline, risk tolerance, available…
Owning several exchange-traded funds may make a portfolio look diversified. But if those ETFs hold many of the same stocks, your investments may be less diversified than they appear. This is known as ETF overlap. ETF overlap occurs when two or more ETFs own the same securities. A small amount of overlap is normal and…
Exchange-traded funds can make diversification easier because a single ETF may hold dozens, hundreds, or even thousands of securities. However, having access to thousands of ETFs creates another question: How many ETFs should I own? There is no universally correct number. Some investors can build an adequately diversified portfolio with one broad-market ETF, while others…
If you have money available to invest, should you put all of it into the market immediately or invest it gradually over several months? This is the central question in the debate between dollar-cost averaging and lump-sum investing. Historical research generally favors investing an available lump sum immediately because markets have tended to rise over…
Yes, many index funds pay dividends—but not every index fund does, and the amount is never guaranteed. An index fund generally passes along the dividend income it receives from the stocks or other securities it holds, after accounting for the fund’s expenses. Depending on the fund, these payments may be distributed monthly, quarterly, semiannually, or…