Personal Finance

3829 readers

1 users here now

Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!

Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)

founded 1 year ago

MODERATORS

[email protected]

How to choose mutual funds to invest in (lemm.ee)

submitted 2 months ago by [email protected] to c/[email protected]

25 comments fedilink hide all child comments

I've been on an HSA+HDHP for a couple of years now and only realized recently the interest earned from investing HSA money is also tax free, so I want to start investing a part of my savings and see how it goes. I have 2 options, Betterment or Mutual Funds. I figured I'd try the latter to avoid fees, but I'm not sure which funds to choose. My HSA currently provides 30 fund options.

I see people mentioning Vanguard a lot so I spread out my initial investment into 25% chunks across 4 different Vanguard funds. How did I choose them? Well I literally just looked at the performance graphs and selected the ones that historically went up steadily without major dips. As a total noob, how can I improve my choices? Is there a simple way to decide without having to dive deep into the stock market?

you are viewing a single comment's thread
view the rest of the comments

[–] [email protected] 1 points 2 months ago

To quantify it, anything under 0.20% is "low" to me, and many funds are <0.05%.

That said, once you get below a certain amount, comparing between "low" fees isn't very interesting. For example, my 401k is switching their S&P 500 fund from a 0.04% fund to a 0.015% fund, which is >2.5x lower fees, but in terms of actual dollar amounts is pretty inconsequential (e.g. for $100k invested, it's $25/year savings. At that point, I'm much more interested in the quality of the fund (i.e. how well it tracks its index) than the actual fees, since even a small amount of inefficiency (more cash, late rebalances, etc) can be much more impactful than that fee difference.

So anything under 0.50% is fine, and anything under 0.20% is "good," and comparing expense ratios breaks down when the difference is <0.05%. At least that's my take.