Brian is single and 32 years old. He is employed as a buyer for a large sporting goods retail chain and participates in an employer-matched 401(k)…

No, investing all of his retirement savings and all his discretionary income into the same S&P 500

Index fund is not the best strategy for Brian because the S&P 500 Index consists only of large

domestic stocks, so Brian isn’t as diversified as he could be, and his investments may not grow fast

enough for him to retire on his 55th birthday. Although the S&P 500 Index fund is passively managed,

which results in lower management fees and lower tax bills, Brian could spread his money among

other index funds that offer these same benefits as well. For example, he could invest in a small cap

index fund, a mid-cap index fund, and even a foreign stock index fund, such as an EAFE Index fund.

This would give him even more diversification potential, and since the stocks in which these funds

invest are a bit riskier, the funds offer a higher expected return, which should advance him toward his

retirement goal more quickly. Brian’s investment horizon is sufficiently long for him to be able to

handle the risk. Furthermore, investing all of one’s money in a single fund-even a single S&P 500

Index fund-isn’t the best strategy, especially if one has a lot of money to invest as Brian does. Not all

S&P 500 Index funds perform equally well.