Why I Keep Over $500,000 in a Single Index Fund

It sounds weird to say out loud… I've got over half a million dollars in one index fund.

That may sound super risky, like having too many eggs in one basket. But the reality is, that one basket is diversified across pretty much every publicly traded stock in the market. I own a tiny fraction of everything.

Here's why I trust a single index fund with such a massive chunk of my net worth -- and why you might consider doing something similar.

1. It spreads my money across 4,000+ companies

The index fund I use most (VTI from Vanguard) tracks the entire U.S. stock market.

So while it may look like I've gone "all in" on one type of investment, I'm actually holding slices of all different kinds of companies, of all sizes, and all sectors. I'm exposed to tech, healthcare, energy, financials, consumer goods -- you name it, I have a small investment in it.

History shows that wide diversification is a winning strategy.

2. Average returns compound like crazy

The average annual return of the U.S. market is about 10% per year over the last 50 years. That may not sound very exciting, but when you factor in compounding it grows like wildfire over time.

Here's how investing $500/month into an index fund could play out with a 10% average annual return:

This is how I grew my current account balances so high in the first place. Slow and steady contributions each month into the right investment accounts.

The stock market doesn't go up in a straight line. Some years it booms and other years it busts. But all I really care about is capturing a decent average return over the long haul.

3. I pay almost nothing in fees

The index fund I use charges just 0.03% in annual fees. That means with a $500,000 balance, I'm only paying $150 per year to keep my investments growing.

Compare that to many mutual funds that charge 0.50% or more -- or financial advisors who take 1% of your portfolio annually. At that rate, I'd be handing over $5,000 every year for advice I don't need.

On top of that, I pay no account fees. I use Charles Schwab as a broker, which offers IRAs with no account minimums or annual fees, regular brokerage accounts, and no trading fees on most funds and ETFs. Read our full Charles Schwab review to learn more.

For me, keeping costs low means keeping more of my money working in the market.

4. I don't have to babysit my investments

With index funds, I don't have to manage anything.

I don't have to keep track of stocks. There's no trading or trying to time the market. In fact, the less I mess with my portfolio, the better it performs.

It's weirdly comforting to know that I don't have to be a genius to build wealth. I just have to stay out of my own way.

5. It keeps my financial life simple

True story: I used to own seven rental properties. And my finances were a mess, with spreadsheets, repairs, and receipts all over the place.

But once I realized how easy index funds are, I started massively simplifying.

Some people enjoy tinkering, trading, and hunting for hidden gems. I don't. I'd rather spend my time surfing, hanging with family, or writing articles like this one.

Index funds might be boring. But boring is what builds wealth.

Ready to simplify your investing strategy? Check out our favorite low-fee brokers and start today.