Ask Stacy: Which Mutual Funds Should I Buy?

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers. You can learn how to send in a question of your own below.

If you’re not typically a video watcher, give it a try. These videos are short and painless, and you’ll learn something valuable. But if you can’t deal with video, no problem: Just scroll down this page for the full transcript of the video, as well as some reader resources.

Today’s question is about which specific mutual funds I’d suggest investing in. While not every fund is appropriate for every investor, in this video I share the funds I personally use, as well as briefly explain why.

For more information on this topic, check out “10 Tips for Sane, Successful Stock Investing” and “13 Dumb Investing Moves and How to Avoid Them.” You can also go to the search at the top of this page, put in the word “investing” and find plenty of information on just about everything relating to this topic.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s the video transcript

Stacy Johnson: Welcome to our money Q&A question of the day. I am your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com. We’ve been doing personal finance news and advice since 1991.

Okay, here’s our question for today. It’s from Judy. Judy says, “I get your oft-repeated message to manage your own finances: Subtract your age from 100. Use that number for (the) percent to put into an S&P-tracking index fund. Divide the remainder by two. Put half in a bond fund and half into a cash fund.” But here’s what she wants. She says, “Take it a step further. How to decide on which funds to put the money into?”

For those of you who haven’t watched me for very long, because I do say this a lot, let me explain what’s going on here. People say, “How do I invest my long-term savings?” My advice is to take your age (and subtract it) from 100, and then put that percentage into a stock mutual fund. Take what’s left, divide it into two parts: Put half into a cash fund like a money market, and half into a bond fund.

Let’s use an example. I’m 62, but let’s say I’m 60 to make the math easy. Sixty from 100 is 40. I’d have 40 percent of my long-term savings in a S&P 500 index fund. I’ve got 60 percent left. Half of that is going to go into a money market fund, and the other half is going to go into a bond fund.

Now, what Judy is asking me to do is tell her exactly which funds. She wants me to be more specific.

Here’s what I use personally: Vanguard funds. So, for my stock investment, I use the Vanguard 500 Index Fund. Now, the reason I use Vanguard is not because I work for them or get paid by them. It’s because they have the lowest fees.

For bonds, I again go to Vanguard. I use their intermediate- or short-term bond index fund. At this moment, I would probably use their short-term fund. Doesn’t pay quite as much as intermediate, but if interest rates rise — which I expect them to do — I probably won’t get hurt as much. Keep in mind that bond funds don’t do well in rising interest rate environments.

Now, for money market — your cash part. I don’t know that I would be at Vanguard for that because their money market funds don’t pay much. So, for this portion, I might use an online bank or a credit union. You can go to MoneyTalksNews.com, go to the Solutions Center and see interest rate comparisons from different banks. You’ll probably find you can get 1.5 percent, way more than Vanguard is paying on their money market funds.

Judy, I hope that answers your question. I want you guys to have a super profitable day, and I’ll see you next time!

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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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