
Hello, I am the The Polite Investor, a polite Englishman that has been
living in the US for 10 years.

Although I have always been interested
in personal finance and investing, once my employer enrolled me in
their retirement plan, I thought it was time to
get serious and figure out how the American financial system works to
make sound investment choices. 

I started this site to document my financial
journey and offer my opinions to help others. Perhaps you might learn something from
my experiences and together we can all try to lead better financial
lives.

I believe the key to building wealth is disiplined saving
and investing coupled with a somewhat minimalist lifestyle. You don't
need stuff and you should have a healthy skepticism towards activities
your peers engage in: mortgages, expensive cars, expensive vacations.
You'll find a little bit of my personal philosophy peppered throughout
the site.



I hope you feel welcome here. Take what you find useful and leave the
rest. Pass on what you’ve learned to your friends. May you find the
financial success you deserve.

Want to say hello?  [Email me](mailto:hello@politeinvestor.com).


Antony Holmes

Polite Investor, CEO, CTO, employee #1, whatever

Becoming a DIY investor might help you become a better investor. It should certainly help you understand if financial advice is really worth paying for. Here I'll discuss what it takes to be a DIY investor and why you should consider this path.



# You save money

Perhaps the most important reason to be a DIY investor is to save money. Financial advice is expensive. It is foolish to mow your own lawn, clean your own house, and work on your own car to save money and then turn around and pay thousands of dollars per year to have your money managed by someone who is mostly doing things you can do yourself with minimal effort and time.

How much can advice cost you? If you save $80,000 per year for retirement for 30 years and pay 1% of your assets to advisors each year, by the time you retire, your portfolio will be $1.5 million smaller ($7.5 million vs $9 million) than if you had managed it yourself. What did your advisor really do for $1.5 million dollars? Not a lot I'll wager. Worse, most of the performance of your portfolio will be driven by the stock market, and you can invest across the whole stock market and capture those returns for essentially $0 if you [buy total market funds](/blog/2022-05-04-total-market-funds) at of the large brokers such as Vanguard, Fidelity or Schwab. 

If you can learn to be your own investment manager, you can make up to $1.5 million worth of mistakes and still come out ahead! If you want to see how the effects of advistor fees compound over time, I wrote a nifty [interactive calculator](/calculators/fees) to show you.

# It's an enjoyable hobby

I think DIY investing is fun. If you want to make a success of it, it's something you'll need to enjoy as well, since this is a long game played over many decades. If you detest it, you may want to rethink doing this on your own because you are unlikely to learn as much as you need to learn and unlikely to pay as much attention to it as you should.

# You have more control

No advisor cares about your money as much as you do. Doing it yourself eliminates the risk of some advisor ripping you off. Remember, their interests are often only casually aligned with yours; they want to profit from you first, and perhaps help you second.

# Start slowly
Managing your own money is easiest if you start doing it at the very beginning when your financial life tends to be pretty simple. Your taxes are easy and your portfolio might only be in the low four or five figures. Mistakes made on a portfolio that small are relatively inexpensive.

You don't have to fire your advisor the day you decide to be a DIY investor. You can manage a portion of your money on your own, perhaps just your Roth IRA or 401(k), and see how much you like it. You should find it to be easy so then you can quickly move onto doing everything yourself. Just don't be tempted to rashly invest in crypto or some other fad investment of the moment until you are really sure you know what you are doing.

# Choose a simple asset allocation
Once you've decided to become a DIY investor, you need to put your money into some investments. Your goal should be to beat inflation by a few percentage points, so you will need to invest somewhat aggressively. That means most of your money should be invested in risky assets like stocks or real estate. The exact percentages don't matter all that much, but the higher you feel comfortable with, generally the better long term. You want something low-cost, diversified, and with an appropriate level of risk—high enough that it will reach your goals and low enough that you can tolerate the volatility. There are hundreds of reasonable asset allocations. Pick one you like, write it down, and stick with it.

Don't know how to pick an asset allocation? Some people follow the rule of thumb of investing (120 - age)% in stocks, e.g. if you are 30, your portfolio should be 90% stocks. If you want some suggestions of portfolios you might use, I have a [page](/reviews/portfolios) for that very purpose.

# Just keep swimming 

Some people don't like the idea of risky assets such as stocks, but for most of us you have no choice and you MUST invest in assets with some risk. Risk free assets simply don't pay enough to reach any kind of reasonable financial goal. If you stick with bonds and CDs you might need to save 50% or more of your gross income every year for retirement. That's just not an option for a lot of people. You need to take investment risk.

# I love it when a plan comes together

Once you have a target asset allocation, it becomes relatively easy to implement and maintain the plan. Pick a low cost brokerage such as [Vanguard](https://www.vanguard.com), [Fidelity](https://www.fidelity.com), or [Schwab](https://www.schwab.com), and open an account and start buying low cost mutual funds or ETFs. You should take advantage of any tax-advantaged accounts available to you. If you put $20,500 into a 401(k) each year, and $6,000 for you and $6,000 for your spouse into Roth IRAs, that's a total of $32,500 in tax advantaged space for a start.

<div class="conclusions">

- Stay the course.
- Maintain the plan and make the required contributions each year, rebalancing the account as periodically as necessary, usually with new purchases.
- Stick with the plan through thick and thin over decades regardless of market conditions.

</div>

_Are you a DIY investor? How did you come up with your investing plan?_

I did it my way

Whether you're just starting to invest or have been for decades, total stock market index funds are still some of the best options for diversifying your investment portfolio whilst being tax efficient.



Total market funds give you access to the entire US stock market in one fund. Today we’re going to take a deep dive into three low cost, index based funds to: VTSAX from Vanguard, FSKAX from Fidelity, and SWTSX from Schwab. The goal is to see if a passively managed fund is a better fit for you than one that’s actively managed. All the funds perform similarly, and largely track the same stocks, so really it boils down to which brokerage you prefer.

# What are Index Funds?

Index investors believe buying individual stocks introduces risks that you are not adequately compensated for taking, such as the company going bankrupt or a borrower defaulting. People who buy individual securities are faced with situations where the securities go down in value when the overall market is going up all the time. Index funds give you broad diversification so you do not have to hedge, pooled costs, daily liquidity, and professional management.

# What Is a Total Stock Market Index Fund?

A total stock market index fund is a mutual fund or an exchange-traded fund (ETF) that tracks the entire stock market across a country or region. You gain passive exposure to companies of all sizes, not just companies with a large market capitalization.

Total stock market index funds usually come with low fees, so investors keep more of their returns. Plus, they are an excellent option for new investors with minimal financial knowledge or experience with picking stocks. However, your growth will be limited to the overall stock market, and it won’t vary much by picking different funds.

# Why use index funds?

The data on active management vs. passive management is clear, too. Time and time again it has been shown that active management doesn't work well enough to overcome its additional costs, particularly over the long term and even more so in a taxable account. At the end of 10 years, an index fund will outperform more than 80% of its actively managed peers. By the time you get out to your 30-60 year investing horizon and consider all of the asset classes in your portfolio, an index fund portfolio is going to outperform 99% of similar actively managed portfolios. Warren Buffet famously even made a [bet](https://www.investopedia.com/articles/investing/030916buffetts-bet-hedge-funds-year-eight-brka-brkb.asp) to this effect and won.

So when you invest in index funds, you can expect higher returns over the long run than those who pick individual stocks or mutual funds.

An index fund portfolio is also generally more tax-efficient than an actively managed portfolio. The turnover is usually lower (index funds try to match buys and sells to minimize transactions), so there are fewer capital gains distributions. The only time these funds have turnover is when there is an Initial Public Offering (no capital gain distribution) or when a company gets de-listed from the exchange (again, no capital gain distribution). Theoretically, the turnover ought to be 0%. In actuality, it's about 4% for various technical reasons. That means the average stock is held for 25 years. Considering the average mutual fund turnover is 85%, holding their average stock for just a little over a year, 4% is basically 0%.

Capital gains are also minimized by the fact that you don't have to change funds every few years when a fund manager retires or loses their touch.

# What Is VTSAX?

VTSAX stands for the Vanguard Total Stock Market Index Fund Admiral Shares. Created in 1992, it’s a mutual fund that tracks the performance of the CRSP US Total Market Index. As of February 2022, the fund holds 4,070 stocks with total net assets of $1.3 trillion making it one of the largest funds in the world (because a lot of people like it). It performs consistently well, and it returned 14.24% over the last decade

The fund’s top 10 holdings account for more than 24.7% of its total net assets:

- Apple Inc.
- Microsoft Inc.
- Alphabet Inc.
- Amazon.com Inc.
- Tesla Inc.
- NVIDIA Corp.
- Berkshire Hathaway Inc.
- Meta Platforms Inc.
- UnitedHealth Group Inc.
- Johnson & Johnson

It is diversified portfolio, but some industries are more heavily represented than others as you can see from the above. For instance, the technology sector accounts for 27.7%, consumer discretionary accounts for 15.3%, and healthcare and industrials each make up a little less than 13%.

The minimum starting investment is $3,000, though it is also available as its ETF counterpart VTI with no minimum. The expense ratio is 0.04%.

# What Is FSKAX?

FSKAX stands for the Fidelity Total Market Index Fund, and it's basically Fidelity's equivalent of VTSAX. Fidelity Investments created the mutual fund in 2011 and it tracks the Dow Jones US Total Stock Market Index. It currently holds 3,968 stocks with assets totaling more than $71 billion. The fund has returned 14.21% over the last decade. Unlike VTSAX, there is no minimum initial investment, and its expense ratio is 0.015%.

You’ll notice that the fund’s top 10 performing stocks closely mirror VTSAX:

- Apple Inc.
- Microsoft Inc.
- Amazon.com Inc.
- Alphabet Inc. (Cl A)
- Tesla Inc.
- Alphabet Inc. (Cl C)
- Meta Platforms Inc.
- NVIDIA Corp.
- Berkshire Hathaway Inc.
- Johnson & Johnson

# What Is SWTSX?

SWTSX stands for the Schwab Total Stock Market Index Fund, and like Fidelity, it tracks the Dow Jones US Total Stock Market Index. It was created in 1999 and has assets totaling more than $16 billion. The fund has returned 14.17% over the last decade. Again, unlike VTSAX, there is no minimum initial investment, and its expense ratio is 0.03%.

# Which Should I Choose?

The following chart highlights some of the main differences between the funds as of April 2022.

<table>
<thead>
<tr>
<th></th>
<th>Vanguard</th>
<th>Fidelity</th>
<th>Schwab</th>
</tr>
</thead>
<tbody>
<tr>
<td>Symbol</td>
<td>VTSAX</td>
<td>FSKAX</td>
<td>SWTSX</td>
</tr>
<tr>
<td>Stocks</td>
<td>4,070</td>
<td>3,968</td>
<td>3,968</td>
</tr>
<tr>
<td>Net assets</td>
<td>$1.3 trillion</td>
<td>$71 billion</td>
<td>$17 billion</td>
</tr>
<tr>
<td>Expense ratio</td>
<td>0.04%</td>
<td>0.015%</td>
<td>0.03%</td>
</tr>
<tr>
<td>Dividend</td>
<td>1.33%</td>
<td>1.18%</td>
<td>1.31%</td>
</tr>
<tr>
<td>Minimum</td>
<td>$3,000</td>
<td>N/A</td>
<td>N/A</td>
</tr>
</tbody>
</table>

As you can see, they are nearly identical on the surface, their returns over the past 10 years and their risk assessment are very similar. Their top 10 holdings are virtually identical as well.

All the funds come with low expense ratios, which means you’ll pay minimal fees (though FSKAX is slightly cheaper). Both funds are managed with a passive investment strategy, which means they aren’t trying to copy an index but are trying to match their performance.

The most significant difference between the funds is that they track different indexes—FSKAX and SWTSX track the Dow Jones, whilst VTSAX tracks the CRSP Index.

<div class="conclusions">

- Bottom line: you really can’t lose no matter which of these funds you invest in. They are all stable, low-cost index funds from three of the oldest and best-known investment firms around.
- If you are investing in a taxable account, the Vanguard funds can be slightly more tax-efficient due to their unique ETF share classes and ability to “flush capital gains out of the portfolio”, but the effect of this is small.
- Whatever you choose, you're most likely going to come out ahead of comparable actively managed funds.

</div>

_Which fund do you prefer? Have you tried actively managed funds vs. total stock market index funds? Which has performed better in your portfolio?_

Total market funds

Freezing your credit is a simple process and stops unauthorized credit pulls and accounts being opened in your name. I'll show you how.



## What Information Do I Need To Provide?

- Name(s)
- Address
- Date of birth
- Social Security Number

## Which credit bureaus should I freeze my credit at?

There are lots of credit bureaus, but these are the 4 main ones where you should freeze your credit reports.

<table>
<tbody>
<tr>
    <td style="font-weight: bold"><a href="https://www.experian.com/freeze/center.html">Experian</a></td>
</tr>
<tr>
    <td>888-397-3742</td>
</tr>
<tr>
    <td>Experian Security Freeze, P.O. Box 9554, Allen, TX 75013</td>
</tr>
<tr>
    <td style="font-weight: bold"><a href="https://www.equifax.com/personal/credit-report-services/credit-freeze/">Equifax</a></td>
</tr>
<tr>
    <td>888-298-0045</td>
</tr>
<tr>
    <td>Equifax Information Services, LLC, P.O. Box 105788, Atlanta, GA 30348</td>
</tr>
<tr>
    <td style="font-weight: bold"><a href="https://www.transunion.com/credit-freeze">TransUnion</a></td>
</tr>
<tr>
    <td>888-909-8872</td>
</tr>
<tr>
    <td>TransUnion, P.O. Box 160, Woodlyn, PA 19094</td>
</tr>
<tr>
    <td style="font-weight: bold"><a href="https://www.chexsystems.com/web/chexsystems/consumerdebit/page/securityfreeze/placefreeze/">Chex systems</a></td>
</tr>
<tr>
    <td>800-887-7652</td>
</tr>
<tr>
    <td>Chex Systems, Inc., Attn: Security Freeze Department, 7805 Hudson Road, Suite 100, Woodbury, MN 55125</td>
</tr>
</tbody>
</table>

## Are Credit Freezes Free?

Yes, you should not have to pay to freeze and unfreeze your credit. Some bureaus offer similar services and monitoring tools that do
cost money, but you don't need to buy these.

## How Long Does It Take For A Credit Freeze To Activate?

If you freeze your credit online, bureaus are required to activate the freeze within one business day. In practice it is generally instantaneous so you can lock and unlock your credit files as needed.

If requested by phone, it must be done within three business days, according to the FTC. Likewise, applying by mail will take longer. I recommend always using the online method.

# Does Freezing Hurt My Credit Score?

No, it simply stops hard pulls on your account so you cannot open new credit lines. It's perfectly safe.

# Can I Apply For Loans And Credit Cards?

No, you must unfreeze your credit before applying for a new credit line, but it's easy to freeze and temporarily unfreeze your card when you need to.

Credit, on the rocks

Fees, you can't avoid 'em, but knowing whether they're bogus can save you a lot of money long term.



You can't completely avoid investment fees, but using a low cost brokerage will allow you to minimize them. The table summarizes common fees you might see attached to a fund. Understand what they are an when to avoid them.

<table>
<thead>
<tr>
    <th>Fee</th>
    <th>When you pay it</th>
</thead>
<tbody>
<tr class="text-red-500">
    <td>Front load</td>
    <td>Cost to buy into a fund or ETF.</td>
</tr>
<tr class="text-red-500">
    <td>Back load</td>
    <td>Cost to sell your investment.</td>
</tr>
<tr>
    <td>Expense ratio (ER)</td>
    <td>Cost of owning a fund, paid yearly normally as a percentage of the value of the investment.</td>
</tr>
<tr>
    <td>12B-1</td>
    <td>An annual marketing or distribution fee. Never worth paying for</td>
</tr>
</tbody>
</table>

Fees are insidious. Often marketed as small % built into the cost of owning a fund/ETF, a seemingly small increase can cause a dramic drop in the value of your investments overtime because they effectively reduce your return each year and this loss compounds over time.

For example, with a starting balance of **$10,000**, and investing **$1,000** a month for **40** years, an expense ratio of **1%** could end up costing you more than **$700,000**.

Don't believe me? I built an [interactive fee calculator](/calculators/fees) that lets you play around and see how much fees can affect your performance. Even with a modest portfolio you can lose hundreds of thousands of dollars over your life time if you don't pay attention.

[Dave Ramsey](https://www.ramseysolutions.com/retirement/why-dave-prefers-up-front-fees) seems to think front load fees are a good idea. I disagree. High loads = high expense ratios in a lot of cases. Pick any major well regarded stock
fund/ETF from a major brokerage such as Vanguard or Fidelity and you'll see they are almost always no load and have a low ER to boot. Load fees are a red flag for bad management and should be avoided at all costs. They are just a waste of your money.

In the early days of the mutual fund business, the 12b-1 fee was introducted because it was believed that by marketing a mutual fund, its assets would increase and management could lower expenses through economies of scale. Mutual fund assets from companies such as Vanguard that do not actively market themselves still grew rapidly taking in trillions of dollars without any help. You might be asking what the point of this fee is then and you'd be right. Critics seriously question the justification for using and today it's mainly used to pay commissions to salespeople for selling a fund's shares. Another waste of your money.

## So what does a low cost fund look like?

Glad you asked. Here a few funds to give you an idea of what high qualit low cost funds look like. BTW you consider having these in your portfolio if you don't already.

<table>
<thead>
<tr>
    <th>Fund</th>
    <th>Symbol</th>
    <th>Load</th>
    <th>Expense Ratio</th>
</thead>
<tbody>
<tr>
    <td>Vanguard Total Stock Market Index Fund ETF</td>
    <td>VTI</td>
    <td>$0</td>
    <td>0.03%</td>
</tr>
<tr>
    <td>Fidelity Total Market Index Fund</td>
    <td>FSKAX</td>
    <td>$0</td>
    <td>0.01%</td>
</tr>
<tr>
    <td>Schwab Total Stock Market Index Fund</td>
    <td>SWTSX</td>
    <td>$0</td>
    <td>0.03%</td>
</tr>
</tbody>
</table>

<div class="conclusions">

- Load fees are charged by subpar companies for overpriced funds. All the good investments you'll ever need can bought for $0 at a reputable brokerage.
- You can't escape the expense ratio (it does cost a company to run a fund), but you can minimize it so it's practically non-existant.
- Try my [interactive fee calculator](/calculators/fees).

</div>

_What's your favorite credit card? How much do you think you save per year?_

Fees! Fees! Millions of fees!

There's an old adage in financial circles that **you get what you don't pay for**.



Just like with vanilla ice cream, sometimes the simpliest, plainest option
turns out to be the most financially delicious.



Don't be fooled by people telling you that investing is inherently complex and you have to pay someone to manage your finances.

You can easily create a simple, low cost investment strategy and manage it yourself which will out perform 90% of the strategies financial managers will try to sell you on.

Just follow these simple steps and you can largely forget about your money and what the markets are doing and go do something more interesting.

- Save at **20%** of your gross income every year towards retirement.
- If you have access to a **401(k)** or **403(b)**, try to max that out especially if you get a company match.
- Try to fill your **Roth IRA** or **Roth 401(k)** .
- If you have money left over, invest through a taxable brokerage account.
- Invest a sizable percentage of your money in risky investments such as stocks, and put the rest in bonds.
- Use a low-cost total stock market index mutual fund and a low-cost total bond market index mutual fund for your investments. You don't need anything else regardless of what you may read.
- Not sure what % of stocks your porfolio should be? Use the [Benjamin Graham](https://en.wikipedia.org/wiki/Benjamin_Graham) rule of thumb and pick the highest value between 20-80% you think you can tolerate. 60% is a reasonable starting point.
- Don't change this % no matter what the markets do. Plan to decrease your investments in stocks over time and re-evaluate your plan every 5-10 years.
- Make your investments at a reputable low cost brokerage such as Vanguard, Fidelity or Schwab. All of these are great companies so pick the one you like best.

Section

Guides & Tutorials

I did it my way

Total market funds

Credit, on the rocks

Fees! Fees! Millions of fees!

The vanilla investor