Frequently Asked Questions

Questions about Our Services and Process

What kinds of people typically use this site? Our users fall into a few distinct groups. First, there are investors who want to set up an inexpensive, self-directed investment program for the first time. Many of these users are prompted to start investing because of a major life event such as marriage or parenthood.

Second, there are classic do-it-yourself investors. These educated investors are willing to devote their own time and energy to personal portfolio management. They visit our site for an inexpensive opinion on an appropriate asset allocation and for tips on properly maintaining their portfolio over time.

Finally, there are investors who currently work with a full-service financial advisor. These users obtain an index-based recommendation so that they can effectively grade the performance of their advisor and/or spark a conversation with their advisor about index investing.

Will I need to provide details about my personal finances in order to get a portfolio recommendation? In order to give you a recommendation that is tailored to your financial circumstances, we will need you to answer some multiple-choice questions about your income, net worth, and investing habits. We will also ask you to enter specific values for the equity in your home and the size of your investment accounts. The only pieces of personal information required for site registration are your name, email address and zip code.

We will NOT ask for your social security number, financial records, account numbers, or any other personal information that is not necessary to provide an accurate investment recommendation. Your recommendation will only be based on information that you provide through our risk questionnaire; we do NOT obtain information about you from any third party, including credit agencies. For more information, see our Privacy Policy.

Once I get my recommendation, can I invest my money through this site? No, we do not take control of your money and invest it for you. Once we provide a portfolio recommendation, it’s entirely up to you whether to act on the advice or ignore it. We do, however, try to provide some additional tools and tips that will help you execute and maintain your portfolio.

I’m not sure about some of my answers. Can I take the risk questionnaire multiple times? The risk questionnaire is intended to be a one-time assessment. It's normal to be a little uncertain about some topics (e.g., your timeframe until retirement), but the questionnaire is most effective when you simply choose the most accurate answer to each question and move on. Your first inclination is probably the best response.

Do any of your recommendations include target-date retirement funds? Our Portfolio Calculators don't recommend specific target-date funds, but they do provide a numerical risk score (0-100) that can be used to find a target-date fund that's consistent with your risk profile. They also tell you if a target-date fund might be a more appropriate investment choice than a multiple-fund portfolio, based on your answers to the risk questionnaire and the size of your investment accounts. While target-date retirement funds are an attractive choice for many investors, there are a few things that you should know before investing. Check out this blog post.

How do I add TIPS to my Standard Recommendation? If you're comfortable with the case for TIPS (Treasury Inflation-Protected Securities), we generally recommend a 25-50% allocation in your bond portfolio. For example, if your recommendation dictates an $8,000 bond investment, you could use as much as $4,000 of this to purchase Vanguard Inflation-Protected Securities Fund (VIPSX) or iShares Barclays TIPS Bond ETF (TIP).

Questions about Index Investing

Is index investing the same as “Buy and Hold?” Not exactly. An investor who buys a security with the intent of holding it forever allows market movements to determine his or her asset allocation. In contrast, an investor who follows our approach closely monitors his or her portfolio and makes the appropriate rebalancing trades when the portfolio deviates from a risk-appropriate allocation.

Isn’t index investing just for inexperienced investors? This is one of several common myths about index investing. Although index investing appears to be simple, the rationale behind it is quite sophisticated. The asset allocation methods used by our site are employed by experienced institutional investors such as pension plans, university endowments, and life insurance companies. Our goal is to give all investors, regardless of wealth or experience, access to these same investing techniques.

Why don’t I hear more about index investing? Don’t expect to hear about the merits of index investing from the financial media or most investment professionals. From the media’s perspective, index investing isn’t exciting enough to attract readers or viewers. People want to hear about how to beat the market, not how to consistently achieve the market return. In the financial community, many careers depend upon the idea that our financial markets contain inefficiencies that are large and consistent enough to profitably exploit. As Upton Sinclair famously said, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Despite the resistance described above, index investing continues to grow in popularity and there are many resources from which you can get more information on the subject. Our Reading List contains a few books that do a good job of providing background and support for the approach. There are also several online forums dedicated to index investing, including those hosted by the Bogleheads (named for Vanguard Founder Jack Bogle).