This Investor Is Worth $4.5 Million. But If He Could Start Over, He’d Put Everything Into a Target Date Index Fund.
Jeremy Schneider is worth $4.5 million. But the creator of the personal finance Instagram account Personal Finance Club says he would put all his money into a single target date index fund if he could start over.
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Here’s how Jeremy Schneider’s $4.5 million portfolio looks right now:
But if he could go back in time and do it all over again, here’s how he says it would look instead:
VFIFX is a target date index fund — Schneider’s new investment of choice. "The target date index fund is actually, truly the most optimal, simple, low-cost investment strategy," says Schneider, who created a website and online community called "Personal Finance Club."
Schneider got his start like many beginner investors, mistakes and all. "In my early 20s I did some dumb stock picking stuff on eTrade, which was the Robinhood of the day," says Schneider. "It was just like throwing spaghetti against the wall, buying and selling random stocks without any serious rhyme or reason." But the mistakes came with an upside for copy trading crypto review Schneider, who learned valuable lessons he now regularly shares on Personal Finance Club. His main advice boils down to two basic tenets: live below your means, and invest early and often.
Why Target Date Index Funds?
Target date index funds are an investment strategy based on the target date, which is the year when you want to access your money and retire. A target date index fund is actively managed to alter the fund’s risk allocation as the target date approaches. For example, if you’re young and have a long investing timeframe, you probably want to start with a portfolio heavily-allocated to stocks for their growth potential, Schneider says. But stocks can be risky and susceptible to sudden market swings, so as you age, it’s good to transition some of your investment toward bonds, which are lower-risk and provide income stability. A target date index fund manages that allocation and transition for you. So instead of changing your investments and rebalancing your allocations manually over the years, "you can buy a single package called a target date index fund, which has those things inside it, and sets the asset allocation based on your age," he says.
Schneider has been balancing and copy trades crypto reallocating his investments on his own, and says a target date index fund not only would have saved him a lot of time and effort, but his portfolio also would have performed better. "For my tricky choosing of seven different funds, all I got was a much more complicated portfolio to manage, and an underperformance of about 0.87% per year." Here’s a look at how Schneider’s portfolio of seven index funds performed compared to a target date index fund since 2015: Courtesy of Jeremy Schneider.
How to Choose a Target Date Fund.
To get your target date, add 65 or 70 to your birth year. For example, if you were born in 1990, you might choose a fund with a target date of 2060. Remember, the longer the time frame you choose, the more aggressive your fund will be for longer. Google "[name of your brokerage] target date index [year from the previous step]". Match your fund to your brokerage to eliminate trading fees. For example, if you’re using Vanguard, choose a Vanguard target date index fund. On the Google results page, find the ticker symbol for that fund. You can also use Schneider’s reference table of target date index funds for the three big brokerages. Check to make sure the fund’s expense ratio is below 0.2%. If it’s 0.5% or higher, the fund is probably actively managed, which adds cost that eats into your investment return. Invest in your chosen target date index fund.
Pro Tip.
If you use Vanguard, you can now get a target date index fund for crypto copy traders even cheaper. Vanguard is dropping the expense ratio on its target date funds from 0.12% to 0.08%.