Target Date Index Funds or a Three-Fund Portfolio

Investing
#1

Hey All,

I just turned 26 and opened up a Roth IRA this year. Thank you Jeremy for teaching me what a Roth IRA even is! Luckily I was still able to contribute to 2019 and was able to max that out before the deadline.

Anyways, I am still learning the ropes of investing and had a question. Is it ok to put all of your money in a target date index fund? Or should I be splitting it up with other ETFs/Index funds like the “Three Fund Portfolio”. For now I have been splitting the $500 a month contributions to the following:

-50% to SWYMX a 2050 Target Date index fund
-50% to SWPPX the Charles Schwab S&P 500 index fund

I’ve just been throwing money in those two while I am learning everything. And as I learn more, change as needed.

Thanks,
Mark

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#2

Welcome @IloveRoads!

Yes, it’s OK to put 100% of your investment in a single target date index fund, like SWYMX. In fact, that’s exactly what I’d do in your shoes. Inside of that fund is thousands of US and international stocks, as well as bonds and even real estate. Adding the S&P 500 is OK. But the S&P 500 is already inside of SWYMX, so you’re not diversifying, you’re just doubling up and adding complexity. That’s OK if you want to have a tilt toward large US companies, but based on you asking this question, i suspect it’s more the throwing spaghetti against the wall strategy and you’re probably best served by going 100% SWYMX.

Here’s a video that may explain it better:

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#3

Sounds good, thanks for the response!

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