Where the sure gains are

Cheaper funds

The average index fund charges 0.09% a year. The average active fund charges 0.57%. Moving from one to the other saves about 0.49% a year, every year, with a range of 0.40% to 0.59% depending on the fund you leave. If you already hold index funds, this line is worth nothing to you, which is the point: it is the first thing to do and the only thing most people need to do.

What you get for the extra fee is a manager who will probably lose. Over the ten years to mid-2025, 90.3% of US stock funds returned less than their benchmark. Over twenty years, 93.8%. Of the 2,373 funds that existed in 2005, 37.3% still existed in 2025; the rest were closed or merged away, usually after doing badly.

The cost is not the fee

A fund's real cost is its fee minus what it earns lending its shares to short sellers. VTI charges 0.03% and earns some of that back, so it costs $1.16 a year per $10,000. IEMG charges 0.09%, more than VWO's 0.06%, and after lending IEMG is the cheaper fund because it earns more than its fee. SPY costs $9.45 per $10,000 while every other S&P 500 fund costs between $1.82 and $2.94, because SPY was set up in 1993 under rules that stop it lending. BND lends nothing.

None of these gaps is large. Together they say: check the cost after lending, not the fee, and never pay for the famous ticker. The funds page lists the cost after lending for every fund priced here.

An ETF instead of a mutual fund

A mutual fund that sells holdings has to pass the gain to every remaining shareholder as a taxable payout. An ETF mostly does not, because of how it swaps shares in and out. In 2025, 7% of ETFs paid out a capital gain against 52% of mutual funds. Vanguard's total-market and S&P 500 funds, in both forms, paid out nothing across 44 fund-years. Two large active mutual funds, AGTHX and FCNTX, paid out 6.6% and 7.0% of their value in a single year. On average, taxes cost taxable holders of US stock funds 1.12% a year, and that cost varies three times as much between funds as fees do. In a taxable account, hold the ETF.

The right account

If you have more than one kind of account, which fund goes where is worth a few hundredths of a point a year, forever, and it costs a form. The rule of thumb from the portfolio on this site: every foreign fund goes into a Roth or IRA before any US fund, RSST and IDMO first because they throw off the most taxable income, and VTI last because it throws off the least. Bonds belong in a retirement account ahead of stocks by a factor of about four.

One thing most guides get wrong: the foreign tax withheld on foreign dividends is lost inside a traditional IRA and a Roth alike, so "hold foreign stocks in taxable for the credit" is right only if you have no better use for the shelter, and you do. Against a sensible default, doing this properly was worth 2 to 7 hundredths of a point a year for the portfolio here. The which-account tool does the arithmetic for your own tax rate and account sizes.

Never selling

Every sale in a taxable account brings a tax bill forward. Never selling is the one edge that costs nothing, and it is why the portfolios here are built to be rebalanced with new money and inside retirement accounts, where a trade has no tax. Realising a tenth of your gains each year over thirty years gives back about half of what deferral would have saved you.

Direct indexing

Direct indexing means owning the stocks in an index individually so that losers can be sold to book tax losses. Over a thirty-year simulation of 400 possible histories, at a 0.09% fee, it cost money on every single path, 0.09% a year on average, against one total-market fund never sold. At a fee of zero it still lost by a hair. A person who never sells has almost nothing to use the losses against: the $3,000 a year you can deduct against ordinary income has not been raised since 1978, and only 0.2% of the losses harvested ever produced a saving. It pays only if you have other large gains to offset every year. And if you harvest a loss and rebuy the same fund inside an IRA, the loss is destroyed rather than deferred.

Rebalancing

Rebalancing keeps your mix where you set it. That is its whole job and it does it: left alone, a 60/30/10 mix of three regions drifted 14.8 points from target on average and 26.4 at the worst. It does not earn a return. On this site's portfolio, rebalancing once a year when a holding is a quarter off target came out −0.09% a year against never trading, with a range too wide to call. On a three-region mix between 1991 and 2025 every rule tested lost to never trading, by 0.24 to 0.44 points a year, because the winning region kept winning. Rebalance to control risk, do it with new money and inside retirement accounts, and do not expect it to add return.

The $100 broker fee

From 1 June 2026 Fidelity charges $100 to buy any of 84 specialty ETFs, and Schwab has announced something similar for late 2026 or early 2027. As of mid-August 2026 none of the funds on this site is on Fidelity's list. If yours is, buy once a year: $100 twelve times a year on a $200,000 account is 0.6 points a year, and once a year is 0.05. Check the list before your first purchase.

Before any of this

Three things outrank every fund on this site, and none of them is an investment. First, debt. Paying down a mortgage or any loan whose rate is above what a Treasury pays after tax is a guaranteed return with no risk, and it is very likely the best return available to any household that carries such debt. It is invisible to every test here because this site measures a portfolio, not a household. The one cost is that a cheap fixed-rate mortgage, once paid, cannot be borrowed again at that rate.

Second, the health savings account, if you have a high-deductible health plan. It is the only US account taxed at none of the three points: money goes in untaxed, grows untaxed, and comes out untaxed for medical costs. The limit is $8,750 for a family in 2026 and $4,400 for one person, plus $1,000 a year from age 55. California taxes it like an ordinary account.

Third, municipal bonds, which pay interest free of federal tax. They are a placement decision, not a return source, and the usual advice to hold them in the taxable account is wrong at the short end. A two-year municipal bond beats a Treasury only if your tax rate is above 39.8%, while a thirty-year one wins above 15.6%. Bonds belong in the sheltered accounts first, so municipals only come into it once your bond allocation is larger than those accounts.