One fund, held well

What you hold

What beats it

Almost nothing, reliably. Over the ten years to mid-2025, 90.3% of US stock funds run by professional managers returned less than the index they were trying to beat. Over twenty years, 93.8% did. Of the 2,373 US stock funds that existed in 2005, only 37.3% were still around in 2025. The rest were closed or merged away, usually after doing badly.

Index funds are the one kind of fund that delivers what the paper says. Across the funds one study followed, the market earned 6.72% a year on paper and the funds that tracked it earned 6.93%. Funds chasing cheap stocks earned 2.84% against 7.76% on paper, and funds chasing rising stocks earned 1.86% against 9.48%. A one-fund portfolio does not have that problem.

How far it falls

US stocks fell −83.7% from their 1929 peak, the number to keep in mind when anyone says stocks are safe over the long run. Since 1990, a cheap mix of US and international stocks fell −52.7% at worst and took 63 months to get back to where it was.

Falls are not the hard part. The hard part is the flat stretch afterwards. In the ten years to February 2009, US stocks returned −2.55% a year. Ten thousand dollars put in at the start of that decade was worth about $7,700 at the end. Nobody had done anything wrong.

The four habits

The fund is the easy part. What you keep of its return depends on four habits, and each of them is arithmetic rather than a forecast.

Hold the cheapest version. Two funds holding the same stocks can charge different fees, and the fee is not always the whole cost. Funds lend their shares out and pass some of the income back, which can more than cover the fee. SPY, the oldest S&P 500 fund, cannot lend and costs about 0.0945% a year all in, while every other S&P 500 fund costs 0.02% to 0.03%. IEMG charges 0.09% and VWO charges 0.06% for the same emerging markets, but IEMG earns enough from lending that it is the cheaper one to own. The funds page lists the real cost of every fund I priced.

Put each piece in the right account. A fund's tax bill depends on where it sits. Bonds belong in a retirement account before anything else, by a wide margin. International funds should be sheltered before US funds. Done well, this is worth a few hundredths of a point a year against a sensible default, and more if you are starting from a bad arrangement. The which-account tool works it out for your mix of accounts.

Hold an ETF, not a mutual fund. An ETF is a fund that trades on the exchange like a share; a mutual fund is bought and sold through the fund company once a day. In 2025, 7% of ETFs paid out a taxable capital gain to their holders. Among mutual funds it was 52%. Vanguard's own S&P 500 and total-market ETFs paid none across 44 fund-years, while two of the largest active mutual funds paid out 6.62% and 7.01% of their value in a single year, all taxable to anyone holding them outside a retirement account. In a taxable account, the average US stock fund costs its owner 1.12% a year in tax, which varies three times as much between funds as the fees do.

Do not trade. Every sale in a taxable account brings forward a tax bill you could have deferred for decades. Never selling is worth about +0.14 points a year over thirty years compared with realising a tenth of your gains each year. Rebalancing to keep your mix is fine, and best done with new money or inside a retirement account. Expect it to keep the mix, not to add return: on this site's own tests, rebalancing rules earned nothing extra and sometimes a little less than leaving the portfolio alone.

What the habits are worth

Between 0.04 and 2.70 points a year. The range is that wide because it depends on where you start. Someone already in a cheap index ETF in one account gains almost nothing. Someone leaving an active mutual fund in a taxable account gains more. The average active fund charges 0.57% a year, so the fee gap alone is about 0.49%, and the tax the old fund was costing comes on top. Two questions set your number: what do you pay now, and do you hold anything outside a retirement account.

One thing to check before you buy

From June 2026, Fidelity charges $100 to buy any of 84 listed ETFs, and Schwab has said it will follow. None of the funds on this site is on the list as of mid-August 2026. Check before your first purchase, because a $100 fee twelve times a year on a $200,000 account is 0.6% a year, more than any fee on this site.

Should you stop here

Most people should. This fund holds the world as it is, which today means 34% of the S&P 500 in seven companies and US stocks priced at 41 times their ten-year average earnings, a level seen only once before, in 1999 and 2000. If those facts worry you, a cleverer stock fund will not help; the answers are fewer stocks, which is the cautious version, or the with-trend portfolio, which is the one construction on this site that adds something different on top of them.

The next two portfolios add ideas that have earned less than the fee gap above and take twenty to thirty years of results to confirm. They are for someone who accepts trailing the market for long stretches in exchange for a chance of beating it. If that does not describe you, this is the portfolio.

Figures on this page are before tax and after fund costs unless the sentence says otherwise.