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Comment by quaresma | Hacker News Reader

Can you point me to some materials about how to invest in index funds? I'm an engineer looking to start making wise choices on where to invest my money.

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Do your due diligence, but here are the cliffnotes:

All stocks in the US: FSTVX, VTSAX

All bonds in the US: FTBFX, VBTLX

Step 1: Put {your_age}% in one of the bond funds, and the rest in the stock fund.

Step 2: Religiously invest a portion of your salary every month.

Step 3: Don't look at your savings more than once every quarter or so.

Step 3.5: Don't let your spending grow out of control as your career progresses and your salary grows.

Step 4: Retire a multi-millionaire in inflation adjusted dollars after 20-30 years or so.

Guidance on the portion of salary to invest?

10% is a pretty common percentage and what I put towards bonds and stocks each month. I do pretty much what the parent post said.

If you want to retire earlier than the traditional 65, this is a good starting point to figure out how much to save based on when you want to retire:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

Save until it hurts just a little bit, and then a little bit more.

My wife and I did 50% of our nominal takehome every month in a high COL area. It was fine.

The more you save, the faster you get to Stage 4.

Warren Buffet's advice for retail investors—that is, people who are not particularly wealthy, have no special connections in the finance world, and do not want to cultivate special expertise—is to buy an S&P 500 index fund with very low fees and never make a withdrawal until retirement. He specifically recommends Vanguard's S&P 500 fund.

I believe this is also what he told his wife to do after his death.

Another version of the cliff's notes is to buy ETFs instead of index funds. ETFs are more liquid since they trade the same as stocks. As you learn more and accumulate more money, you can also start buying individual stocks.

The top Index ETFs that I would recommend (index in parens):

  SPY (US S&P 500)
  DIA (US DJIA)
  BRK-B (Berkshire Hathaway*)
  EFA (MSCI EAFE, aka developed countries in Europe and Asia)
  EEM (MSCI Emerging Markets, aka China, Korea, Brazil, India, etc)

I would recommend at least 2/3 US indexes and the rest international. Don't worry too much about international exposure since all US multinationals operate globally; e.g. buying Coca Cola (KO) is actually a bet on economic growth in China.

* While BRK-B is not an index ETF, it's actually the first stock I would recommend for new investors to buy. BRK-B is Warren Buffet's company and has broad exposure to the US market.

https://www.vanguard.com/ Lots of great information on this.

Boglehead forum and wiki is the place you might want to go to learn index based passive investing.

https://www.bogleheads.org

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