Ask HN: Does an index fund count as diversifying?

Most online places charge about $10 per trade. So even if you're putting $200/mo in, you're losing 5% immediately. Best choice would be to save up for several months and do fewer trades.

You really need to do better research, your statement that you don't want to learn about the stock market is a good way to guarantee that you never really make the kinds of returns you should. If there was a reliable, easy no-knowledge way to grow your investments, people would already be doing that.

A better option may be to look at some money market accounts. We have accounts with Ford Motor Credit and GMAC (now Ally). Check out http://www.ally.com/money-market-account/index.html it's not going to be the highest possible return rate, but there are no fees for "investing" your money, the funds are liquid, and as you get to higher balances you can get better returns. This is where we keep our "accessible" funds (low 6 figures).

Also, I'm not sure how much you're contributing to your 401K, but it may be worth bumping that up as well. You should probably at least be doing 10% of salary.

High-yield CDs would also be something to look at.

In short, for the dollars you're talking about, I would NOT consider anything that charged a transaction or maintenance fee, it would eat up any potential earnings.

> Most online places charge about $10 per trade.

I think the OP is talking about index funds, not stocks. If you invest in the fund that your broker manages, there usually isn't such a "purchase fee" for index funds, only some of the more risky funds that want you to demonstrate that you're willing to eat some losses in hopes of a bigger payout later. The bigger fees tend to be associated with more active management, which generally doesn't apply to funds that simply track an index.

I've never been charged this transaction fee on Fidelity Spartan 500 (or whatever it is called now), for example. Vanguard also has a pretty good reputation for their low- or no-fee funds.

It is impossible to answer this question without knowing what kind of index fund you are investing in ("large, broad index fund" does not say much). For example, if you buy an S&P 500 index fund, you are not indexing the stock market. You're just indexing a bunch of blue-chip US stocks, and you don't have exposure to asset classes such as bonds, small cap equity or foreign equity.

If you will need the money in 3-6 years you should not put it in the stock market. If you want to fund an early retirement then there are a lot more variables into this equation that you do not seem to take into consideration. What is "early"? How much money will you need into retirement? What other source of income besides savings will you have during retirement? Do you intend to raise a family? Etc. It is impossible for anyone to answer these questions for you. This is why you should learn about the stock market, and about personal investing in general, if you want to make informed decisions about making your money work for you.

I very strongly suggest that you read "A Random Walk Down Wall Street" by Burton Malkiel.

If your employer isn't matching that entire $10k, you should look into other retirement options.

http://www.iwillteachyoutoberich.com/blog/the-worlds-easiest...

"First, I would max out any 401(k) match that my company provides. Second, I’d max out the $5,000 for my Roth IRA. Third, I’d max out the rest of my 401(k), up to $15,000. Finally–if your employer doesn’t offer a 401(k), you’re not employed yet, or you still have money left over–I’d open a regular, taxable investment account and put money there in stocks, index funds, etc.

Why max out your Roth before your 401(k)? Well, there’s a lot of dorky debate in the personal-finance world, but the basic reasons are taxes and tax policy: Assuming your career goes well, you’ll be in a higher tax bracket when you retire, meaning that you’d have to pay more taxes with a 401(k). Another common reason for the Roth is that tax rates are considered likely to increase. Remember: Your 401(k) money is taxed at the end, while Roth money is taxed right away and then grows tax-free."

Besides considering (1) the current-tax-rate vs. retirement-tax-rate and (2) tax rates are likely to increase, the other major thing to keep in mind is (3) that the government may decide to tax Roth IRA distributions in the future (even though it says it won't now).

Think it won't happen? Social security benefits weren't taxed until 1984.

EDIT: Also, if you're currently raising a family and/or paying for kids' college, it's very plausible and reasonable that you'll be in a lower tax bracket when you retire.