How to make Money in the Stock Market

Okay, admittedly my title for this article sounds like something that you might see in your Spam folder.

But it’s also completely accurate, because I really can teach you the best way to make money from the stock market, for life, all in one short blog post.

Okay, I admit it – this is widely available information: I am going to hand out some advice that has been handed out widely before, for many years now.

But the reason I’m still writing is that ignorance still seems to be widespread. Almost nobody I meet in day-to-day life knows anything about investing, the stock market, or big publicly-traded companies in general. Their opinions on the subject range throughout boredom, fear, mistrust, and if they are lucky, curiosity. Or if they are unlucky, bold confidence in their abilities to drastically “beat the market” with their intuition.

Here are three real quotes I have heard from friends over time when discussing the stock market.

“Stocks are just a big roulette wheel.. You can’t go out swimming with those sharks on Wall Street – they’ll just eat you up!”

“I don’t know what my retirement money is in.. I just checked some boxes on the sheet when I started my job, but I don’t really understand it”.

“I don’t really believe in mutual funds at all – I’m dedicated enough to do my own research and I can pick winning individual stocks.. I’ve got some Facebook, some Google, some Crude Oil/Gold/Pig’s Feet/whatever…..”

All three of these approaches are understandable, but wrong.

The sentiments are valid and I’m glad that people at least have an opinion, but each represents a lack of knowledge about the statistics that run the whole system. Knowing the nature of the market is the key to being able to invest huge sums of your money over time with the absolute confidence that you’re not doing anything stupid.

It’s worth gaining this confidence, because investing knowledgeably in stocks has always been an incredibly useful way to secure your own retirement. Sure, it’s not the only way, but from what I’ve seen so far, it’s the single most reliable way to build up a nice chunk of money, and then have it live on in the form of a stream of lifetime income, with very little ongoing effort on your part.

To start with the basics – What is a stock?

A stock is a slice of a company that you truly own. When you own a share, you have the right (but not obligation) to attend the shareholder’s meeting for that company, vote on important company decisions, and most importantly, you have a right to a share of any future earnings that company makes. This share of earnings is called a Dividend.

In some companies, especially those that are smaller or are still growing, the company elects (with the permission of its shareholders) to reinvest the dividends to help the company grow its earnings even faster. In theory, this means you will get more dividends in the future. Thus, the real value behind any share in a company is the right to get a never-ending stream of dividends from it.

For Example, the old, long-profitable company Lockheed Martin currently pays a 2.8 percent annual dividend while growing slowly, while Google, fancying itself a high growth company, pays zero percent right now and reinvests all profits for faster growth. When I first wrote this post, Apple was in the no-dividend camp as well, but sure enough they have matured and now pay a little one: 0.6%.

Why do stocks go up and down so much?

The true value of a stock is based on the amount of dividends this stock will eventually pay you, the shareholder, over time. That dividend depends entirely on how much money the company will make.

But nobody actually knows in advance how much money companies will make – they just have a big host of differing opinions. Every day, millions of investors and analysts scurry around and worry about how much money each company will make in the future.

“The Libyan People are Revolting! This will make the world have a shortage of oil, so prices will go up! Oil Companies are now worth more! Buy! Buy!”.

“The US economy is slowing down! This means people will drive LESS to the shopping mall and buy less gas! Oil demand will go down and oil companies will make less! Sell! Sell!

It’s a neverending din like this, for every single stock, on every single stock exchange, throughout the world.

If stocks are so crazy, how can I make money off of them?

Because in the LONG run, it turns out that all this speculation and volatility always cancels out to absolutely zero.

The value of stocks will go up as the earnings of the underlying companies goes up.  A portion of the ongoing earnings will always flow to the shareholders as dividends.  And all this happens because of the natural ingenuity of hardworking humans making things at a profit, and continuing to advance our knowledge and technology and make us all more productive in every field.

There may come a time when we can no longer advance, but based on the fact that we’re still driving around in gas-burning tanks and Home Depot is still doing all of its computing on green-on-black mainframe computers that kick you back to the beginning of the order if you make a typing mistake, I’d say we have at least a lifetime left to go in this department.

So, stocks go up and pay dividends over time, and they have since the beginning of modern commerce. The total return has averaged a very lumpy but fairly dependable 10 percent per year before inflation, 7 percent after inflation.

5 of the 7 percent comes in the form of rising stock prices, and the other 2 comes from dividend payments directly from the company to you. When you’re in your ‘Stashing stage, you just let these dividends automatically reinvest in more stocks which creates a nice compounding effect.

But WHICH stocks do I want to buy to make this free money?

This is the easy part. You buy ALL of them.

The best minds in finance have done countless studies on this for over 40 years. What they find is that the best way to make money in the stock market is to simply buy an “index fund”, which is a mutual fund that automatically buys appropriate ratios of every major stock in your country’s stock market, with no magic and guessing of which stocks are better than others.

The reason the index fund wins statistically is because it can be run by a simple automated set of rules – no need to pay 350 million dollar salaries to the hotshot traders running the “Aggressive Growth Fund” down the street. Because there are millions of people, both smart and dumb, squabbling over the value of each stock, the Index Fund benefits and suffers from all the individual stock performances. But overall, you get the average performance of all this squabbling.

If you descend into the pit and try some squabbling yourself, you may come out ahead or drastically behind the average, but as it turns out, you can’t predict in advance which squabblers (including yourself) will win and which will lose. All you can predict is that your average performance if you buy enough of these funds will be equal to the return of the market as a whole, minus the amount of fees your mutual fund charges.

So by picking the index fund with the lowest fees, you automatically win. Endless statistical analysis proves this again and again. If you don’t believe me, read the book “A Random Walk Down Wall Street, or look up the topic of John Bogle / Bogleheads / and the foundation of the Vanguard company itself.

But my uncle bought some stocks once and sold at a big profit! Also, if index funds really are the statistically best bet, why are there still thousands of brand-name mutual funds and hotshot traders out there?

For the same reason that Las Vegas still exists and people still drive SUVs.

Humans are irrational creatures and it is scientifically proven that we overestimate our own investment (and gambling) abilities, and no presentation of knowledge to the affected people can completely erase this. I have some perfectly intelligent friends who still believe they are “lucky” at games of chance, even though any scientist in the world can quickly run an experiment to irrefutably disprove the existence of any form of luck.

The only tool you can truly use is statistical probability, and by buying the market average and lowering your investment costs, you are improving your statistical chances.

OK, Fine. Which Index fund do I want?

There is one king index fund that makes the decision easy for you. The Vanguard Total Stock Market Index Exchange Traded Fund (VTI) tracks the entire US stock market index.

Its expense ratio is 0.04%. This means that for every $100,000 of shares you hold, they subtract $40 per year from their gains to pay for their offices and trading costs. Some funds charge 10-20 times higher fees. So if you are looking over employer-sponsored plans, try to find a total stock index fund (or at least its close cousin the S&P 500 index fund), and compare the expense ratio to 0.04%.

What is the S&P 500?

This is basically a list of the 500 largest companies in the US, and therefore in most of the world. They are all multinational companies, so they benefit from growth around the world. If you really want to invest without having to worry, the S&P represents good odds. If you buy the stock market index of a smaller country, like Canada, you will still have good odds, but at higher volatility. (During the dot-com boom of the nineties, a company called Nortel once represented 70% of Canada’s entire stock market value. This company is now bankrupt, so you can imagine how that felt to investors solely in the Canadian index. Later, Canada became the new Saudi Arabia with oil exports around 2010, so its index started riding high on oil company stocks. More recently, oil is looking like it won’t be our main fuel forever, so am glad I didn’t bet my whole Mustache on that one commodity either).

What about International stocks?

Some people like to get fancy and buy international index funds, which can do well when the US is hurting (as it has been recently). This is fine, as long as you understand that it’s just another form of trying to outsmart the basic stock index.

When you do this, you are stating that you believe the  stock markets of the other countries are more undervalued relative to future growth, than the US market is. The US is traditionally the most business-friendly country in the world, so its stock index has tended to have the highest performance, after taking into account its lower risk and volatility compared to, say, throwing all your chips onto Russia or China.

It may or may not pay off in the future – I just want to point out that most people just make this decision on a whim, something like “China is so hot right now, they’re taking over the world!” . Whereas to actually justify international investing rationally you’d have to be a very sophisticated investor and truly understand WHY you are doing it.

So there you have it – in two words: Vanguard.com, and VTI. In Canada, check out TD Waterhouse and their own series of funds, and let me know if you have any questions about what you find there – MMM has a Canadian Investments Expert Panel that can help us out.

Update: Read this great book to get a deeper understanding

A few years after writing this article, my friend JL Collins wrote a really entertaining and educational book that teaches you just how simple stock investing (and money management in general) can be. The book was so good that I accepted his request to write the foreword, and even narrate my own part for the Audible version that came later! The book has been a big seller in recent years in multiple countries and languages, and for good reason: It’s good information in an easy-to-read style. 


  • Nick January 8, 2014, 8:07 pm

    I can certainly see the sense in what you say. An index fund is a really good option, but for those inclined to build their own portfolio, owning single stocks can be a good deal. My family has successfully been making money in the market for the last 40 years, so I have some basis for my opinions. I started investing when I was 16 and have done quite well over the years. Statistically you reach a level of diversification at about 25 stocks that improves only marginally even if hundreds more are acquired. Our strategy has been simple; buy good stocks in reasonably different types of enterprises, buy only blue chip stocks, almost never sell these stocks. You speak of the cost of trading. Except in extreme circumstances, the initial fee, seven bucks, should be the only fee you pay. Once you have acquired the twenty-five stocks you wish to hold forever, add new money in an even spread across the twenty -five. Spend only dividends, never touch capital, don’t let a falling market rock your boat. I know this sounds like a too easy approach, but every day trader or yearly trader I know goes broke eventually. Index funds are a great buy, but I have some individual stocks my uncle bought back in 1980 that are thirty times their purchase price. You won’t get that with a fund.


  • booch221 January 17, 2014, 10:45 am

    So Mr Money, are you recommending a 100% stock allocation?

    I had Vanguard prepare a financial plan for me when I retired. They recommended 50% stocks and 50% bonds.

    Furthermore, they recommended using the Vanguard Total Stock Market Fund, Total International Stock, Total Bond Market, and Total International Bond Market funds.

    • Markc January 25, 2014, 11:17 am

      I wouldn’t recommend 100% stocks unless you are at least 15 years from retirement (and even then, many would say to have at most 80% stocks). Go to the Bogleheads wiki to do more research on this (bogleheads.org). Be sure to check out their starter pages and the section on Lazy Portfolios.

  • Lance January 19, 2014, 9:56 pm

    Hi Mr. Mustache,

    Love the blog. Have you ever seen Paul B. Farrell’s Lazy Portfolios?

    They seem to fit your way of thinking.

    I used one of his lazy portfolios last year & it worked just fine. But… this year I beefed it up even more by using ETF’s which do the same thing as mutual index funds but at an even lower cost…. here’s what I bought… I called it the “Lazy Portfolio : The Neighbor Next Door”

    VOO: Vanguard S&P 500 ETF: 34% (Expense ratio: 0.05%)
    VYM: Vanguard High Dividend Yield Index ETF: 33% (Expense: 0.10%)
    JNK: SPDR Barclays High Yield Bond ETF: 33% (Expense: 0.40%)

    Keep it up.


  • Sterling January 20, 2014, 12:35 pm

    Living in Canada, I’ve been managing my own portfolio as an index investor for the past two years. Doing a quick search on this page I was surprised to see that “The Canadian Couch Potato” hasn’t been mentioned anywhere. I made the switch from a big investment company to my own management after reading this blog. It answers most of the questions that people have had in this thread and has a very knowledgeable community (be sure to read the comments as there is great information in there too!). I can’t recommend this site enough!!!


    Edit: I’m new to the blog and reading from the start. I see that I just haven’t gotten to the Couch Potato blogs yet. =)

  • Andrew Olund February 5, 2014, 1:42 pm

    MMM… How do I know what Index fund I should buy? On Vanguard there are many different options. As an early 20 something I would like to invest early to have the funds say 20-25 years from now to retire (the whole reason I found your blog).

    • Nathan February 25, 2014, 10:38 pm

      Andrew – MMM is clearly advocating the purchase of a passive index fund that covers the entire U.S. stock market. The ticker symbol for the ETF is “VTI” or you can purchase the mutual fund edition (VTSMX) if you have an account through Vanguard.

      Unfortunately, Vanguard has a minimum investment on their mutual funds so if you’re just starting out and have less than a couple thousand, you’ll have to look elsewhere. VTSMX is also more expensive at 0.17% compared to VTI at 0.05%.

      For the ultimate low cost investing method, I would recommend opening an account with TD Ameritrade. You can get commission-free ETF trading on over 100 ETFs. VTI is one of them. No account minimum, either. Just sign up for a Roth IRA or some tax-advantaged account and buy shares of VTI.

      If you want to get fancy, you can add some LQD or AGG for bond exposure. Even a 10% bond holding could help stabilize your portfolio in the event of a down market, which would enable you to buy more if the market fell.

  • John in Raleigh February 17, 2014, 7:22 am

    Would the Vanguard ETF, VTI be a better choice. I believe it is the same stocks at a lower expense ration?

  • Franco April 16, 2014, 2:22 pm

    I’m Franco, from Argentina.
    This was a very interesting article, but I have a question:
    Instead of only invest on Vanguard Total Stock Mkt Idx Inv (VTSMX), ¿Is not a better idea make a diversified portfolio with four ETF or funds?

    Here’s my idea of a portfolio for long term:

    -iShares Barclays 20+ Year Treas Bond (TLT) => (Monthly dividends)
    -iShares Core S&P 500 ETF (IVV) => (Quarterly dividends)
    -SPDR Gold Shares (GLD) => (No dividends)
    -SLV Plata (ETF) => (No dividends)

    Can you please be so kind to tell me what do you think about this portfolio?
    Thank you very much!

  • Waingro May 6, 2014, 6:35 pm

    Please don’t forget about good old giant FIDELITY. Their Spartan mutual funds have fees just as low as Vanguard. The Spartan 500 Advanatage class expense ratio is just 0.05%. It’s easy to set up automatic monthly investments. And if you have your work 401k there, even better. It’s nice to have all your accounts in one place. Plus, you can get the Fidelity credit card, giving you 2% cash back on EVERYTHING.

  • AdventurousZ May 12, 2014, 8:44 am

    Hey MMM,

    I don’t know a ton about investing so pardon my ignorance, but I thought asking this question may clear things up for some other folks (I read all the comments). I have heard that it is important to start maxing out a Roth IRA (if you don’t have 401k with match from your job) and then an HSA (Health Savings Account); although I just realized that my Roth is at a .78% expense ratio (are all Roths higher than regular investments accounts?) . Do you think this is baloney and that I should just move it to the Vanguard account you recommended or open a Vanguard once I have maxed these two first?

    I am also curious about whether I should pay off debt first or invest? I have about $5-6k in student loans at 2.5-3.5%, should I pay that first (no other debt) or invest my money and pay the minimums as I can expect an average of 7% from the stock market? Thanks!

  • Anna M June 23, 2014, 3:46 pm

    Hi, I just read the article but couldn’t read all the comments because I just had eye surgery. I am in my mid-twenties, make 54k (before taxes, etc) and won’t have many expenses (no student loans or rent) until I start paying rent in about 8 months. I contract for the government and my company does not provide me with a retirement fund of any kind. I’ve calculated and have estimated that I can save about $2000 each month for the next 6 months. Should I keep that money in the bank or invest some of it? What do you think? Thank you.

    • AdventurousZ June 24, 2014, 6:29 am

      Most people without a 401k, invest in a Roth IRA, which is a similar yet tax-advantaged account. Tax-advantaged means that it is funded with after tax dollars rather than a 401k that is funded with pre-tax dollars. The “benefit” of funding with after-taxed dollars, is the theory that you are currently in a lower tax bracket, than the one at age 59 and 1/2 (formerly people’s highest earning years) when you are able to remove the funds. The only exception that I know of, is the ability to use your Roth IRA for a down payment on your first home without penalty.

      I have two problems with this. As an early retiree, you might want to access some of the dividends before 59.5 (although the key is to have a strong safety margin so you don’t need to) and that if you retire early and only do odd part-time jobs, you may in fact be in a higher tax bracket now.

      Last consideration, you usually need $3,000 to open an Index fund account, and only $1,000 to open an IRA, but it sounds like you have a pretty beefy income and could probably save a good deal more than 2k/mo. if you get really mustachian.

  • Anna M June 24, 2014, 8:22 am

    Hi, Thank you for your response. I’m not necessarily looking to retire particularly early. I don’t mind working, I would just like to have a hefty cushion to do things like travel and be able to have a child. The problem is the cost of living in DC is very high and I don’t want to be scrambling in my mid-thirties to afford healthy food and living space for a family of three (most likely). What do you recommend in this case? Also, what does retiring ‘early’ even mean these days? 30s, 40s, 50s?

  • Sumeet B July 1, 2014, 2:41 pm

    Hi Moustachians,

    I caught this article way back in 2012 (or even perhaps in 2011). Over time, the article itself and ensuing comments have provided me all the knowledge I needed to reallocate my portfolio. Needless to say, it has been very rewarding.

    Fast forward to July 2014, S&P 500 P/E Ratio is running at 19.69 and Shiller P/E Ratio is at 26.46. I know we should not time the market, but for those of you that are 100% in index funds, have you considered diversifying into metals, bonds, currencies, or down-paying 3.x% mortgage?

    I know MMM already stated in the article, “Because in the LONG run, it turns out that all this speculation and volatility always cancels out to absolutely zero.” But if we do follow 1%, 2%, 50% rules when evaluating returns on potential rental properties, why don’t we layout some benchmarks for index funds.

  • Kevin C. August 24, 2014, 5:57 am

    Great article. I just want to add one thing. If you happen to be a government employee and have access to the Thrift Savings Plan, its index funds are even cheaper than the Vangaurd Total Stock Market Index and you should be buying into that. Last year the expense ratio was 0.029%, which is typical for the TSP. This rate applies to all the funds, including their target date funds. They get it so low because part of the employer match doesn’t vest for three years. Money forfeited by people quitting before three years is directly applied to TSP expenses to bring the cost down.

  • Jean September 1, 2014, 12:13 pm

    Hi MMM!

    I really enjoy your philosophy and advises. Keep going!

    I am really confused. I am 22 student and I just opened a Roth Ira in E-trade before I was unemployed again. I read of the tax benefits of the account and the flexibility of investing. I did not had the money to open a Vanguard account.

    The question are:

    1) How you recommend I invest the money in the E-trade Roth IRA? I know with index funds, but which, how and where will be more efficient to do it (after considering expenses ratios, transaction fees, etc.)

    2) I also have an old Traditional IRA. Can I legally have a traditional IRA and a Roth IRA? My brick-bank sucks, how can I move it, if possible, and to where?

    3) I follow your conscious frugal anti materialistic/consumerism approach to life and pursuit of happiness. However, I would like my investments to follow my environmental and social concerns (social justice, fossil fuel climate disruption,… you get the picture). There is a way to invest in socio/environmental friendly index funds?

    I’m happily waiting for your advises!


  • Amit October 6, 2014, 5:08 pm

    I started reading your blog 3 days ago and i arrived here.
    This one has been the important one so far because now i have a clue on where I’m gonna put my stash money.
    Up until now I’ve been using my investment adviser in my bank to invest for me in a “low risk” funds and bonds.
    Bank fees are high and my stash didn’t grow as i wanted it to be.

    in the last 3 years I’ve been saving about 80% of my monthly income.
    these last few month saving has been reduced to 55% due to house rental and little bit of spending.

    After reading your blog i started my own week challenge of listing all extra saving.
    3 days have past and i got to almost 100 ILS (Israel shekel)

    looking forward for next post and I hope I catch up pretty quickly with the blog timeline


  • Wilfredo October 13, 2014, 5:23 pm

    Hello MMM: I need some serious advice on my current investment situation. I rolled over my (TSP) Thrift Savings Plan from the U.S. Army when I retired back in July 2010 into an Edward Jones account where I have like 4 different Franklin Templeton funds, in a Roth IRA. Should I roll all of it over to Vanguard or another reputable investment company in no-load funds instead and let it continue to grow for the next 20 plus years? I am 50 years and have already retired from the military with over twenty years and I am a disabled veteran unable to work anymore. I am still contributing to my Roth IRA and recently changed my contributions from $541.66 to $241.66 for this year so I can have more income. There is over 20,000 dollars in my Edward Jones Roth IRA currently. What do you suggest I do next?

  • E November 20, 2014, 2:38 am

    Just starting to seriously take your advice after two years. I do not have a Vanguard Account or the means to start one. I do on the other hand have a Fidelity 401k and no IRA yet. Is it a good idea to put my Fidelity 401k into Schwab Total Stock Market Index Fund® SWTSX and Vanguard Total Stock Market Index Fund Investor Shares VTSMX?

    Are there different fees from using Fidelity over Vanguard? Sorry if I didn’t Google much, just a young guy and his wife trying to wrap our heads around this stuff. Mainly me doing the research and then getting an aye or nay from the missus. Any help and advice is greatly welcome!

  • Terri November 30, 2014, 9:19 am


    I’m new to your blog and catching up on all the older blog posts. I was wondering if you could explain which fund I should choose as a Federal Employee that would most closely match an index fund. Fed Employee retirement accounts (TSP) have several options:

    L -Fund: Lifecycle Funds that are invested according to a professionally determined mix of stocks, bonds and securities based on various time horizons (a time horizon is the date when you expect to withdraw your money)

    G-Fund: Government Securities Investment Fund-invested in short-term, U.S. Treasury securities that are specially issued to the TSP (Government securities with no risk of loss)

    F-Fund: Fixed Income Index Investment-invested in a bond index fund that tracks the Lehman Brothers U.S. Aggregate (LBA) bond index (U.S. investment-grade corporate, Government and mortgage-backed securities)

    C-Fund: Common Stock Index Investment Fund-invested in a stock index fund that tracks the Standard &Poor’s (S&P) 500 stock index (primarily large U.S. Companies)

    S-Fund: Small Capitalization Stock Index Fund-invested in a sock index fund tat tracks the Dow Jones Wilshire 4500 Completion stock index (medium to small U.S. companies)

    I-Fund: International Stock Index Investment Fund-invested in a stock index fund that tracks the Morgan Stanley Capital International EAFE(Europe, Australasia, Far East) stock index (primarily large companies in 21 developed countries).

    I can choose to invest in any combination of these funds. What do you think?



    • Phil December 4, 2014, 10:16 am


      To get the Total Stock Market Index referred to in the article you would combine the C-Fund (S&P 500) with the S-Fund (Wilshire 4500 Completion).

      For a start you could consider the simpleton’s portfolio recommended by W. Bernstein in the Intelligent Asset Allocator, a great read that I learned about on this blog. It’s designed to have good returns in most market conditions with less volatility than all stocks. In your case I think the nearest combination would be 25% S & P 500 (C), 25% Wilshire 4500 (S), 25% International Index (I), and 25% Short Bond (G). Of course, if you have a long time horizon and strong stomach there is nothing wrong with all stocks as well.

      I think the best advice is to max out the contributions. I wish I had started doing that sooner!

      • Terri December 5, 2014, 12:29 pm

        Thanks Phil! I will definitely check out your reading recommendation. Yes, maxing out the contributions is a great idea and, thank goodness, I started doing that as soon as I started working for the government at age 27.

  • Bruno December 27, 2014, 12:56 am

    Hi. Question: What if you’re a newly self employed, starting to make some money and 52 years old? Since I don’t have any employer to make contributions, can I start an IRA with VTSMX?

  • Ana December 28, 2014, 12:15 pm

    Although your article here was written a while ago I bet a lot has changed. Do you still recommend VTSMX? I just found this article on Marketwatch advising the opposite.

  • Mnemonics January 3, 2015, 11:44 pm

    MMM- How about an update? This was written in 2011, and in 2013 you hinted about revamping this post. Have your opinions changed on the aforementioned stocks?

  • vijay January 5, 2015, 10:41 pm

    Dumb Question,
    I am excited after reading your post.
    I want to start investing in stocks but i do not have a heart to lose and I have no idea where to start.
    which brokerage firm to start with, as they all charge money for each trade and requires a min balance.
    Also like you said Vanguard, can I buy vanguard from an online brokerage account?

  • Luis January 10, 2015, 10:39 am

    Quick question:

    So any tips on how to know when to enter the market, even if it is through an Index Fund? S&P500 is at very high values today? How to best time your entrance in the market?



    • Benjamin January 12, 2015, 12:12 am

      Hi Luis, nobody can time the market. Best is to use DCA, Dollar Cost Averaging. This means spreading your entrance to the market by buying shares on a monthly or quarterly basis. If the shares go up or down, your buy price will be averaged.

      I entered the market last week with a Global indexfund and will invest every quarter.

      I am from Belgium and have to work through a broker so i keep the amount if orders limited, to limit the total order costs.

      • belegger January 25, 2015, 1:55 pm

        Hey Benjamin,

        Indeed, you can not time the market (I wish I could) and I therefore decided to enter the market with monthly buys. I got a lump sum and will invest it over the next 10 months in one ETF. My goal is to add additional investments after that, if the amount I can put in is big enough to avoid to high percentage of brokearge costs.

        For now, I invest 100 pct in stocks. Why: I have a horizon of 30 years for this particular investment and Bonds do not feel good right now (emotions, a bad thing, I know)

        My chosen ETF has TER of 0,2pct the downside is the overweight of US and almost no EM. I moght add an EM later on. I balance the absence of EM via another investment portfolio that is about 1pct EM

  • Steve January 10, 2015, 4:59 pm

    2 Questions:

    1. Do you think it is wise to buy an Index Fund even at this point of time where US stocks are generally incredibly expensive and the Dow Jones is on a record high? I know investing in Index Funds usually excludes attempts to time the market, but on the other hand at the moment it seems like there is only a few more percent to gain and so many percent to lose. What do you think? Buy now or wait?

    2. Do you also invest in single stocks (companies) you chose or only in index funds? Do you also sometimes see companies and feel like “I have to invest in this company because it will be big in the future”, although you know that index funds deliver a more reliable profit. So include some single stocks or strictly stick to only Index Funds?

    • Mr. Money Mustache January 12, 2015, 11:17 am

      Hi Steve,

      In general, I avoid individual stocks and also avoid trying to guess what the market will do. You might be wrong sometimes, but statistically you will get the best results over time.

      These days (a change from when I first wrote this post), I feel that the way to get the same or better results with less volatility is to own the whole world’s economies rather than just the US. I have started doing this through Betterment, which you can read about here – http://www.mrmoneymustache.com/2014/11/04/why-i-put-my-last-100000-into-betterment/

      • Meechity January 14, 2015, 7:13 pm

        I had the same question … about waiting, since stocks appear unusually expensive.

        I’m 36 and debt-free with average salary (will need a replacement commuter-mobile in a couple of years). Besides a employer-matching 401K, I’ve got about 25K in cash to my name, all in checking and savings. Should I throw a large chunk into Betterment? Or should I just start with a small monthly investment?

        Thank you for this life-changing blog!

  • Melissa February 18, 2015, 12:41 pm

    Hi MMM – what are is your recommendation for Canadians purchasing Vanguard index funds? Which one should I buy? Is there significant currency conversion costs? Thanks!

    • Ben March 25, 2015, 1:50 pm

      +1 to Melissa’s comment…!

  • Ben March 25, 2015, 1:53 pm

    …also, what books or where would you recommend one to go learn about index funds and getting familiar with investing in the stock market as a whole? (I am currently slowly making my way through Tony Robbin’s “Money – master the game”; he mentions similar advice about index funds).

    I spoke with my financial advisor friend last week about index funds and he was in a hurry to play damage control on me moving money from a small TFSA I started and invest it into an index fund like with Vanguard.

  • David April 16, 2015, 8:49 am


    What percentage allocation would you recommend in bonds, and what bond fund should I invest in via Vanguard?

  • Jenna May 4, 2015, 1:42 pm


    being a Canadian, reading all this is awesome but a little confusing. I am on the vanguard.com site under Canada ETF’s.. help! I have accounts with TD and ATB and will be checking out my investment options in Canada but the US sounds a lot better!

  • JohnM July 10, 2015, 4:25 pm

    Great article.

    One thing not covered here (but covered extensively on Vanguard and in “A Random Walk…” is the importance of getting your allocation correct (i.e. stocks v. bonds, domestic v. international, real-estate, etc).

    Luckily Vanguard released a tool earlier this year to create a very simple portfolio. Answer a few questions and it will produce a recommended allocation into a small number of low-cost funds. You can find it here:


    If you are dollar-cost averaging, you can use the ratios produced to determine how much of your $X weekly / monthly amount to allocate to each of those funds.

    John (long-time Vanguard fan)

  • Alexis August 28, 2015, 1:32 pm

    Hi MMM and Readers,

    I’m trying to make an investment decision and would love some help. I have $13,000 in a regular Scottrade Acct., $10,700 of which is cash (the other part is in GLD). I’ve got another $13,000 in a Roth IRA, mostly in a Vanguard retirement acct. I have $4200 in school debt at 2.65% fixed interest, and no other debt. I’m 34 years old, and expect to be entering grad school in 1-2 years. Hopefully I’ll qualify for a low-income grad school loan and/or get a lot of fellowship money so that I don’t have to take out too many loans, but this is an unknown. I’m not making a lot of money right now- probably only able to save about $2000 in the next year. What should I do with my $10,700 in cash? Save it in cash for school since grad school loan rates are in the 6% range? Pay off my current school debt and save the rest in cash? Invest in an index fund and sell if needed when I enter grad school?

    Thank you so much.

  • Hannah November 6, 2015, 2:24 pm

    Hi there!

    I’ve been reading from the beginning and really enjoying all the posts. I have a few questions about investing:

    1. I am about to start working at a cloud-based EHR company that will offer me company stock at a discount. Should I buy it or stick with index funds?

    2. I have an account at Charles Schwab, where I buy my Vanguard index funds – am I costing more money by being with Schwab and not going to Vanguard directly?

    Thank you!

  • Pigeonherd November 12, 2015, 2:57 pm

    Hey Mr.MM,
    I am a pre-Junior Mustachian just starting to think my way around all my past finance mistakes, and while there are some that took me a long time to figure out (gotta convince spouse that we have plenty equity in new-bought car to sell & get used car), individual stocks are fortunately something I only needed to test out once.

    The year was 2013, and I had just been hired permanently to a position I’d been a temp in for a year. The employers set me up with all the usuals: health/life ins, union dues, retirement account… I thought I’d be bright (for once) and set up an additional retirement account to help myself save on taxes, so I opened a Roth IRA and put a few hundred dollars in it. Definitely not the max, but as max as I could at the time.

    About a year later, like an idiot, I read about an uber-stock that was set to skyrocket!! How wonderful. (eye roll) Shares were $1 a pop, so after researching (as if I had any clue how to evaluate a company for investment) and careful consideration of my risk tolerance, I bought 100 shares at $100. Enough to gauge any real growth, little enough that I wouldn’t be heartbroken (or worse) if it didn’t perform.

    And MAN, DID IT NOT PERFORM. The first month or so I checked it multiple times a day, and it actually went up a little bit (probably due to all the hype). It is now worth $0.07/share as of this writing. Additionally, it’s an evil evil stock to have purchased (XREG), and if I had considered the idea of “buy only what you can confidently stay in for 10yrs” I would never had gifted them my money. I have since become acquainted with this philosophy, however, and actually do plan to keep this stock indefinitely– not because I think it’ll go up one day, or because it’s something I believe in, but purely as a cautionary tale to myself to Never Ever Ever Again be so foolish as to think I can predict something like this after a couple afternoons’ worth or surface-research, and to leave this stuff to the professionals.

    Other than my Roth (which I no longer use to purchase stocks), my current investment spending is limited to my Acorns account, which (though similarly amorphous in my understanding) is at least a portfolio on which I see actual dividends. As a bonus, because I work for a community college and have an email address that ends in “.edu” I don’t have to pay any monthly maintenance fees (which, at $1/mo are not bad to begin with).

  • Mara December 6, 2015, 7:45 pm

    We are at the point where we are trying to decide if we should stash money for a down payment or start investing. We have no debt and 4 months as an emergency stash….don’t know where to to go next?
    I am also confused about the 401K options…how do I make sure the best option has been selected?
    any help, resources, links to previous MMM articles are appreciated!

  • Ry Money January 15, 2016, 2:30 pm

    Hi MMM,

    I’m really buckling down now to take some action today and wanted to know if you’d clarify something for me.

    (As an aside, my situation is that I am 25 years old, have $25,000 saved, no debt, no investing experience, and I have no 401k because my job doesn’t offer it.)

    I’ve been trying to take the approach of being frugal, investing and eventually getting big dividends in the long term to retire as early as possible without having to wait until 65 with a Roth IRA.

    Based on your recommendation I’m opening a Vanguard account but was wondering if you recommend it to be an individual general savings or Traditional IRA. Once I have the account I would invest in The Vanguard Total Stock Market Index Fund…Basically the goal I have in mind is to retire early with dividends eventually being substantial enough to help cover expenses as you’ve inspired me to accomplish. :)

    If you’d rather link me to one of your articles, that’s cool too.

    Thank you for any advice!


    • Mr. Money Mustache January 15, 2016, 3:32 pm

      Hi Ryan,

      As long as you’re making enough money to be paying noticeable taxes, it’s usually good to max out the tax-deferred accounts first (401k and IRA). Don’t worry, you’ll be able to get that money out penalty-free before 65 if you end up needing it: http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/

      But as life goes on, you may find you don’t need that cash before 59.5 after all – either way, you win.

      • Ry Money January 19, 2016, 10:51 am

        Thank you! I appreciate the feedback!

  • Katharine January 26, 2016, 1:36 pm

    Hi there,
    Thanks for all your advice – this blog has recently become a favorite of mine! Quick question: I am a twenty-something who is just starting to get her feet wet with investing. I recently opened an ETrade account and have purchased shares in just a few blue chip stocks as a start. However, after reading your post, I’m wondering if it would be more worth my while to build my cash savings until I have enough to open up the Vanguard account you recommend. What are your thoughts on this? I should mention that ETrade charges $9.99 per trade and does charge an account service fee. Thanks so much for your help!

    • Mr. Money Mustache January 26, 2016, 2:56 pm

      Hi Katharine – great work, you are almost there. But instead of buying individual stocks, I’d suggest you buy the whole index via index funds.

      There’s a new, more efficient way to get your Vanguard shares that allows you to get their funds without a Vanguard account and with no minimums. It is called ETFs – exchange traded funds – and you can get them in any brokerage account.

      To accomplish what I suggest in this article, just look for the ticker symbol “VTI” and just start loading up on it. To minimize transaction costs, you could collect your funds and buy at monthly intervals. Or get a Vanguard Brokerage account (free) which allows you to buy Vanguard ETFs for no fee at all.

      More on VTI: https://www.google.com/search?q=vti&oq=vti

      • Katharine January 27, 2016, 5:37 am

        Thanks so much, I’ll definitely look into this!

    • John January 26, 2016, 7:14 pm

      I agree with Mr. Money Mustache that Vanguard index funds are the way to go. If you’re looking for a cheaper method of purchasing before you acquire the minimum for a Vanguard account I would recommend Stockpile. They have 1$ trades and if you want you can purchase individual stocks.

  • Glenn Dixon February 5, 2016, 7:40 am

    Just for kicks, I decided to see how an investment made when this blog post was written might have done.

    VFINX – up 43% – not bad!

  • Nadia March 29, 2016, 12:22 am

    Hi MMM, is this information still current? I live in Australia but am planning to move to the U.S. Should u be looking to buy the Vanguard US stock index fund? I’ve never invested in my life, and I need the odds on my side. I’m 31. Please advise. Love, Nadia

  • Joe June 15, 2016, 1:50 pm

    Hi MMM and Friends,

    Let me know if I’m overthinking this at all. Outside of a 401K at my work I have no experience with investing. How do you recommend I purchase the VTSMX? Should I just buy shares outright or would you recommend that I open an account such as a Roth IRA or a 401K with Vanguard and then purchase the VTSMX shares through that program?

  • Jay Radoslovich August 21, 2016, 10:53 pm

    Hi Mr. MMM,

    Thanks for writing! After reading your post, are advising people to invest directly in the stock market (through a broker such as Vangaurd) so that when you retire early (before age 65) you can pull from your dividends and investments without penalties OR are you suggesting to invest in a IRA type account where you can have the tax advantages? I was just thinking about this today as I stumbled across your post.

    (MMM, obviously you know this, but just for the person who doesn’t, when investing directly in stocks or stock indexes such as VTSMX, you first pay income tax as you get paid from your employer, THEN once you invest, make gains, and sell, you pay additional tax on the gains. With IRA’s, you CAN’T pull the money out without penalties before a certain age (65+), and you either: pay income taxes upfront as the money is being invested but not when you pull it out (Traditional IRA) OR: you defer your income tax upfront, but pay income tax when you pull money out on the capital and capital gains (Roth IRA).


  • Stefan August 24, 2016, 5:17 pm

    Really nice posts! One question: Which indexfund would someone from the Netherlands invest into? Vanguard isn’t an option. It seems like DeGiro.nl has the lowest fees for ETF’s. I’d like to start ASAP and am pretty decent at saving: Drive electric, solar panels, simple house and the next step I’d like to be is invest in a historically good European ETF (or can/should I still invest in the S&P 500..?)

    Love your posts, thank you in advance!

  • Poor Canadian November 28, 2016, 8:32 pm

    Hi MMM, thanks for the great site and information.

    About this article, I think you can edit the part saying “Now Canada is the new Saudi Arabia with oil exports, so its index is again riding high on oil company stocks. I wouldn’t bet my whole Mustache on that one commodity either).” to “Canadian money is now shitty because of oil is going down, and if you listen to me, you didn’t have all your money on it” :P

    Have a good day :)

    • Mr. Money Mustache December 1, 2016, 11:00 am

      Thanks PC and good point – now that this blog has been around for over 5 years, we’re starting to see the natural path of the economic cycle doing its usual magic. Hopefully people notice this as they work through the old articles.

      I’m still waiting for Canadian house prices to drop (or at least stagnate for a few decades), however. The prices are completely out of line with world pricing, building costs, Canadian incomes and rent ratios. Maybe in another 5 years this comment will look wise.

  • Varun December 5, 2016, 11:35 pm

    Hey Mr MM!

    Being in India, Vanguard is not accessible to me.
    Can you recommend what people in India can do?

    Our indexes is just made up of 100 and 50 shares
    Can we invest on these indexes?

  • Mike December 10, 2016, 7:24 pm

    Mr. MMM: I’ve been investing in my company 403b plan for several years. After reading this article I did some research and the expense ratio is 0.67! Ouch. My employer matches 25 percent for the first 2 percent I contribute. Should I just contribute the 2 percent and start investing the rest in VanGuard or is the tax benefit worth it if I max out my 403b?

  • Jen L December 24, 2016, 9:53 pm

    I found your blog and am reading every entry and loving it. I’m glad to know I’m not alone in thinking there’s a better way to live than working to buy crap I don’t need :)

    Have you updated this post? I’m ready to open a Vanguard account but I’m curious about your end-of-2016 thoughts. Thank you!!

  • Leo January 7, 2017, 4:01 pm

    Hi, MMM,

    After a year with my new 401K I decided to take a look at and review the investment allocation I had been set up with when I first signed up for the plan with my employer and found that I have a couple of Vanguard funds in it. Yeahhh! Having fallen for the Vanguard philosophy after reading your blog and others, including JL’s book, I’m seriously thinking of changing the allocation to just one or a couple of the funds offered by the plan. I come from a country where investments were not allowed, but now living in the States and being a little late, at 46 years old, I want to do the best I can to be able to be comfortable and financially secured by age 60. So I decided I’m going to max out my plan to the $18K contribution limit and stick to it. Notice I said my “new plan”meaning that I’ve only had it for a year with just a couple of thousands in it.

    The funds in question as of today are:
    Large Blend VINIX w/ ER 0.04% @ $207.40,
    Small Blend VSCIX w/ ER 0.07% @ $62.64,
    Mid Cap VMCIX w/ ER 0.07% @ $36.74

    I’m willing to go Aggressive with my investments for the next few of years and go more Moderate to Conservative as I start reaching my targeted retirement age which would be about 14 years from now. Would you give me your thoughts on these funds and strategy?

    I’d like to thank you so much in advance for your help and congratulate you for all you have achieved in life including this great blog that has opened my mind to a new way of thinking. I owe you big time, man.

  • Jacob February 16, 2017, 8:19 am


    Thanks for the information here. It’s helpful and thought provoking. Your podcast with Ferriss this week was incredibly insightful. This article was written several years ago. Is the last paragraph your current recommendation? I’m beginning to read through your articles. Wasn’t sure if you had updated or recommended posts pertaining to this. Would appreciate any direction or links. Investing is new and a bit ominous to me. Thanks for the help.

  • GARRETT February 17, 2017, 1:22 pm

    Hello MMM,

    late bloomer here. Just started your blog a few days ago and I love it. I am opening a vanguard account, and it gives me options as far as “general savings” or “retirement”. the retirement than has a sub category of “roth/traditional”. What would you recommend? I am 32, no debt other than mortgage, and have about 15k in savings, and a retirement account with close to 95k.

    thanks for your advice!

  • terri February 17, 2017, 11:27 pm

    Hi there – I am completely new to your site and to investing. I am Canadian but currently living in Australia. I have about $100000 Canadian recent inheritance sitting in a zero interest free HSBC bank account right now. I have no experience at all with the stock market. Would you advise me to seek out a broker to set up Vanguard Index Fund for me… do you have any knowledge of this index fund in Australia? As a Canadian who will eventually move back to the STates or Canada with my American husband, should I/can I invest in US Vanguard Funds?

  • DL February 20, 2017, 2:18 am

    Hello MMM,

    I’m about to check out Vanguard as the article suggests, but what I’m not clear of is:

    Is this applicable only if I put a lump sum in?

    Or is this more of a regularly/monthly put a fix amount in kind of thing?

    Or does it not matter?


  • Phillip Thai March 3, 2017, 4:29 am

    Hey MMM,
    Really love the post! I just have a two part question in regards to which Vanguard Total Stock Market Index Fund account should I open? and why? Thanks in advance!


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