Best Low-Cost Index Fund or ETF to fund Roth IRA

[G-Man]

I opened a Fidelity Roth IRA recently for wife and I. Plan to fully fund both IRAs this week using the backdoor Roth method.

Need some suggestions on some good low-cost index fund or ETF to fund the Roth IRAs.

Any recommendations?

 

[Dash man]

I opened a Fidelity Roth IRA recently for wife and I. Plan to fully fund both IRAs this week using the backdoor Roth method.



Need some suggestions on some good low-cost index fund or ETF to fund the Roth IRAs.



Any recommendations?

SCHD

 

[gayl]

They're all pretty much the same as far as diversity but a little difference in expense ratio: FZROX (0.0%), SCHB & VTI (0.03%).

FWIW I hold 16k shares SCHB

 

[OldShooter]

They're all pretty much the same as far as diversity but a little difference in expense ratio: FZROX (0.0%), SCHB & VTI (0.03%).

This. Look for low expense ratios and "total market" funds.

A bigger consideration is how much international coverage you want. A US total market fund only gets you about 55% of the world's available stocks. Arguments ebb and flow as to how much international coverage should be in a portfolio, with 30% being a commonly-recommended number. This is "overweighting" the US somewhat. We own VTWAX, which is everything. No weighting decisions; we just take what the world gives us.

Here is a good video: Ken French on International: https://famafrench.dimensional.com/videos/home-bias.aspx

and some reading: Vanguard on International: https://investor.vanguard.com/investing/investment/international-investing

 

[G-Man]

Any other recommendations?

 

[CRLLS]

Which index do you want to follow?

 

[Sunset]

SCHD

+1
and/or VTI

Whatever OP does don't buy a bond fund, or will get trapped in the discussions

 

[big-papa]

There is no such thing as "best". What are you looking for? A broad, market weighted index fund that tracks something close to the entire US market and/or international? Something more narrow? And SP500 fund, perhaps? Maybe even more narrow than that? Do you have interest in tilting?

Question is way too broad to give a meaningful answer without knowing more. And even then, opinions are going to be all over the place because each of us has our own ideas about what we want to invest in and why. And what any of us do may not even apply to your situation.

Cheers.

 

[big-papa]

+1
and/or VTI

Whatever OP does don't buy a bond fund, or will get trapped in the discussions

Same can easily happen with stock funds...

 

[arcyallen]

There is no such thing as "best". What are you looking for? A broad, market weighted index fund that tracks something close to the entire US market and/or international? Something more narrow? And SP500 fund, perhaps? Maybe even more narrow than that? Do you have interest in tilting?

Question is way too broad to give a meaningful answer without knowing more. And even then, opinions are going to be all over the place because each of us has our own ideas about what we want to invest in and why. And what any of us do may not even apply to your situation.

Cheers.

Agreed. If you're asking "what's the best fund" it may indicate you'd benefit from more research into what you want, and what you can tolerate. Taking blanket advice from strangers before doing some "money soul searching" is a recipe for disaster. The best funds out there may kill your finances if you don't know what you're doing with them (and why).

 

[mrfeh]

Any other recommendations?

You haven't even specified if you are looking for equities or fixed income. Or US or ex-US.

Can't help you.

 

[Sunset]

OP - If nothing else, then take the shotgun approach since there are no trading costs and spread the $ amongst different ETFs/Funds

 

[OldShooter]

OP - If nothing else, then take the shotgun approach since there are no trading costs and spread the $ amongst different ETFs/Funds

WADR, buying multiple total market funds that cover essentially the same stocks (US total market, US S&P 500 etc.) provides no diversification benefits, only unnecessary portfolio complexity.

Buying multiple stock-picker funds (or even just one) almost certainly is a strategy to underperform the overall market.

One total US market fund, seasoned to taste with one International market fund is really all the OP needs. An alternative is a total world fund like VTWAX, which is what we hold.

So for equities, one or two funds should be adequate, absent a desire to tilt the portfolio in some direction.

 

[G-Man]

which index do you want to follow?

s&p 500

 

[latexman]

FXAIX will do that.

 

[G-Man]

FXAIX will do that.

What is the equilevant of SCHD for Fidelity?

 

[wolf]

My plan. Keep it simple. Any one of the following. All, Total Stock Market Index funds.

Vanguard. VTSAX .04 (Expense ratio).
Fidelity FSKAX .015
Schwab SWTSX .03

 

[G-Man]

My plan. Keep it simple. Any one of the following. All, Total Stock Market Index funds.

Vanguard. VTSAX .04 (Expense ratio).
Fidelity FSKAX .015
Schwab SWTSX .03

Trying to decide between FSKAX and FXAIX.

Then, the question becomes should I fund the Roth IRA with an index fund or ETF?

 

[mrfeh]

Trying to decide between FSKAX and FXAIX.

FSKAX is more diversified, but performance will be very similar.

 

[OldShooter]

FSKAX is more diversified, but performance will be very similar.

Yes. the S&P is like 80% of the US market cap so not literally "total market" but the remaining 20% of the market is highly correlated so in the end it doesn't make much difference. Run them both on Portfolio Visualizer and see.