this post was submitted on 11 Nov 2023
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This is all great advice in this thread that I can vouch for. If you have more questions post more threads - this investing stuff is more or less a "solved" math problem so you'll generally get "the right answer" from anyone in this community.
There's also more to learn beyond what to buy and where it goes. You should also look into the psychology and strategy of Boglehead investing. You'll need the nerves/rationality to never ever sell your stocks or react to market changes in any way. Don't even look at the market or your money ideally. Set a course and trust the math. The best way to lose invested money is by touching it. The more you touch it, the more you lose. Index fund investing is so simple that you may feel anxious that you are not doing enough - this is normal and it's important that you don't start fiddling with your money by e.g. tilting towards tech or trying crypto etc.
You should look at the funds once or twice a year to rebalance your funds back to the ratios you planned originally.
Eg, your plan is to be 30% bonds 70% stocks. You check every January 1st and see if you still have that balance. If it's 25% bonds 75% stocks, move 5% stocks into bonds to return to your planned ratio.
Yeah, annual rebalancing is a thing if you're going that way. You'll need less rebalancing if you invest in a total world index fund (auto-rebalances domestic+foreign stocks) or a Target Date Fund (auto-rebalances everything for you). I'll also note that ideally you shouldn't sell any positions while rebalancing, just start buying more of the other thing. If your plan is 30% bonds/70% stocks and you're at 25%/75%, pump your next paychecks into bonds until you reach the right ratio again.
I disagree with this. Since bonds and stocks average the same over time, if one is over or under performing, a rebalance will sort of time the market. Plus it's way easier than changing things multiple times. Also, let's say that 5% difference is 20k. How long will you invest to rebalance that ratio?
I'm not sure if you meant it in the way that it reads but stocks and bonds absolutely do not return the same amount of money over time - why would anyone ever buy risky stocks if bonds returned the same? Also, if your 5% difference becomes that wild then you can try rebalancing every paycheck instead. There's no downside to this other than needing to calculate more frequently. When you're retired and no longer earning, you can sell from your portfolio's overweighted portions to rebalance instead.
If one section of your portfolio has gotten smaller that means that part is doing bad or other parts are doing well. Buying portions that are doing bad means you're buying them "on sale". Buying portions that are doing well means you're "paying extra". The end result is similar to selling high and buying low, just like a sell+buy rebalance would, except that you're only ever "buying low". This changes to "selling high" in retirement.
To be more clear, you can sell and rebalance if you want but make sure you're not causing taxable events by doing so - avoiding these taxable events is the primary reason to 'only buy' to rebalance (or 'only sell' in retirement).
Where physically do I go, and who do I contact to begin an index fund?
It depends on where you're putting it. Someone already posted the US flowchart which I highly recommend following.