The Total Stock Market Portfolio is the simplest and most cost-effective way for anyone to invest their money without overthinking it.
- 100% Total Stock Market
Following the most common recommendation for this portfolio to put your money in a US-based total market fund like VTSAX, the charts use a US fund for American investors while translating the same idea to a total domestic market fund in other countries. But a similarly simple idea that could make sense to a lot of people around the world is to select a global stock fund. The results can be easily mapped in the My Portfolio tool using DEV-TSM.
Find country-specific versions and appropriate ETFs using the Performance charts.
In contrast to the common advice to never put all of your eggs in one basket, the Total Stock Market portfolio does just the opposite. Buy a single total market stock fund and for the most part just ignore it. It doesn’t get much simpler than that!
While hardcore asset allocation fans may think that sounds way too simplistic, there’s a lot of merit to the idea that young investors are best served by spending less time on fine tuning their portfolios and more time on earning and saving. The most articulate advocate for this line of thinking today is perhaps JL Collins. Here’s what he has to say about the idea of putting everything in a total market fund and calling it a day:
Owning 100% stocks like this is considered “very aggressive.” It is and you should be. You have decades ahead. Market ups and downs don’t matter ‘cause you avoid panic and stay the course. If anything, you recognize them as the “stocks on sale” buying opportunities they are. Perhaps 40 years from now you might want to add a Bond Index Fund to smooth out the ups and downs. Worry about that 40 years from now.
Collins has a substantial following in the FIRE community, and the Total Stock Market Portfolio (which he refers to as the Wealth Building Portfolio) is a staple among aggressive young investors looking to race to financial independence. It’s a good choice for people who want to truly keep it simple and who are willing and able to power through the inevitable drawdowns that come with a volatile asset allocation.
Books about the Total Stock Market Portfolio, and others by JL Collins
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Insights that mention the Total Stock Market
Portfolios with a similar structure or design intent
Global Market Portfolio — Tracks the full field rather than a single haystack
Classic 60-40 — Adds a bond fund to reduce risk
No-Brainer Portfolio — Mostly stocks, but with a little more variety
Change the home country to translate the portfolio to local assets, currency, and inflation.