How to chose index funds, mutual funds from a plethora of options (TD Ameritrade)
I agree with others here that suggest that you should be taking higher risk since it is repaid with higher returns. You have 40 years or so to go before you might switch to safer but lower return funds. I suggest that you look at the Morningstar rating for the funds you are considering: http://www.morningstar.com/ A fund rated five stars means that the fund performs in the top 20% compared to all similar funds. I prefer five star funds. Next, check the management fees. Here is an example from one of the funds you mentioned; https://www.google.com/finance?cid=466533039917726 Next, I suggest you compare how each fund has performed compared to a benchmark. Here are some common indices:  Compare an equity fund to, for example, the S&P 500. Has your fund beat or closely matched the S&P for 1, 5 and 10 years? If not, you may as well buy an index fund, such as SPY. One thing to be aware of when choosing mutual funds and index ETFs is the total fees and costs. The TD Ameritrade site almost certainly had links that would let you see the total fees (as an annual percentage) for each of the funds. Within a category, the lowest fees percentage is best, since that is directly subtracted from your performance. As an aside, your allocation seems overly conservative to me for someone that is 25 years old. You will likely work for 40 or so years and the average stock market cycle is about 7 years. So you will likely see 5 or so complete cycles. Worrying about stability of principal too young will really cut into your returns. My daughter is your age and I have advised her to be 100% in equities and then to start dialing that back in about 25 years or so.
Most ETFs are index funds, meaning you get built in diversification so that any one stock going down won't hurt the overall performance much. You can also get essentially the same index funds by directly purchasing them from the mutual fund company. To buy an ETF you need a brokerage account and have to pay a transaction fee. Buying only $1000 at a time the broker transaction fee will eat too much of your money. You want to keep such fees way down below 0.1%. Pay attention to transaction fees and fund expense ratios.  Or buy an equivalent index fund directly from the mutual fund company. This generally costs nothing in transaction fees if you have at least the minimum account value built up. If you buy every month or two you are dollar cost averaging, no matter what kind of account you are using. Keep doing that, even if the market values are going down. (Especially if the market values are going down!)  If you can keep doing this then forget about certificates of deposit. At current rates you cannot build wealth with CDs. How do (index and active) mutual funds trade? Do they buy stocks as soon as a I buy a share in the mutual fund, or do they have fixed times they trade, such as once every week/month/quarter?   Is it theoretical possible for someone to front run mutual funds, if someone holds individual stocks? Let's say an institutional investor creates an order of $100m in a mutual fund, how likely can a broker, which holds a fraction of the fund's portfolio, front run and take advantage of that trade? It is more likely to front run that fund if it's an active small cap fund, but how likely is it to front run trades for index funds? For point two.. The norm for buying stock is to just register online with a major broker: Fidelity, Schwab,TD Ameritrade...etc, send them money to fund your purchase, make the stock purchase in your account, and then have a little faith. You could probably get them to physically transfer the stock certificates from them to you, but it is not the norm at all. I would plan on a fee being involved also. The 10$ is for one trade... regardless of if you buy one share or many. So you wouldn't buy 1 share of a five dollar stock as your cost would be absurd. You might buy a hundred shares. I would say that the three most important skills are: Note that some costs are hidden. So, for example, a mutual fund investing in other countries than where you live in may mean the investment target country charges a certain percentage of dividends going to the mutual fund. The mutual fund company doesn't usually want to tell you this. There may be clever financial instruments (derivatives) that can be used to avoid this, but they are not without their problems. If you diversify into equities at low cost, you will have a very wealthy future. I would recommend you to compare two options: ...and pick from these options the cheaper one. If your time has a high value, and you wish to take this value into account, I would say it is almost always far better option to choose an index fund. Whatever you do, don't pay for active management! It is a mathematical truth that before costs, actively managed investments will yield the same return than indexed investments. However, the costs are higher in active management, so you will have less total return. Don't believe that good historical return would imply good future return. However, if for some reason you see an index fund that continuously loses to the index more than by the amount of stated costs, beware! "I use TIAA-Cref for my 403(b) and Fidelity for my solo 401(k) and IRAs.  I have previously used Vanguard and have also used other discount brokers for my IRA. All of these companies will charge you nothing for an IRA, so there's really no point in comparing cost in that respect.  They are all the ""cheapest"" in this respect. Each one will allow you to purchase their mutual funds and those of their partners for free.  They will charge you some kind of fee to invest in mutual funds of their competitors (like $35 or something).  So the real question is this: which of these institutions offers the best mutual and index funds.  While they are not the worst out there, you will find that TIAA-Cref are dominated by both Vanguard and Fidelity.  The latter two offer far more and larger funds and their funds will always have lower expense ratios than their TIAA-Cref equivalent.  If I could take my money out of TIAA-Cref and put it in Fidelity, I'd do so right now. BTW, you may or may not want to buy individual stocks or ETFs in your account.  Vanguard will let you trade their ETFs for free, and they have lots.  For other ETFs and stocks you will pay $7 or so (depends on your account size).  Fidelity will give you free trades in the many iShares ETFs and charge you $5 for other trades.  TIAA-Cref will not give you any free ETFs and will charge you $8 per trade. Each of these will give you investment advice for free, but that's about what it's worth as well.  The quality of the advice will depend on who picks up the phone, not which institution you use.  I would not make a decision based on this." What decision are you trying to make?  Are you interested day trading stocks to make it rich? Or are you looking at your investment options and trying to decide between an actively managed mutual fund and an ETF? If the former, then precise statistics are hard to come by, but I believe that 99% of day traders would do better investing in an ETF. If the latter, then there are lots of studies that show that most actively managed funds do worse than index funds, so with most actively managed funds you are paying higher fees for worse performance.  Here is a quote from the Bogleheads Guide to Investing: Index funds outperform approximately 80 percent of all actively   managed funds over long periods of time. They do so for one simple   reason: rock-bottom costs. In a random market, we don't know what   future returns will be. However, we do know that an investor who keeps   his or her costs low will earn a higher return than one who does not.   That's the indexer's edge. Many people believe that your best option for investing is a diverse portfolio of ETFs, like this.  This is what I do. "Bit hesitant to put this in an answer as I don't know if specific investment advice is appropriate, but this has grown way too long for a comment. The typical answer given for people who don't have the time, experience, knowledge or inclination to pick specific stocks to hold should instead invest in ETFs (exchange-traded index funds.) What these basically do is attempt to simulate a particular market or stock exchange. An S&P 500 index fund will (generally) attempt to hold shares in the stocks that make up that index. They only have to follow an index, not try to beat it so are called ""passively"" managed. They have very low expense ratios (far below 1%) and are considered a good choice for investors who want to hold stock without significant effort or expense and who's main goal is time in the market. It's a contentious topic but on average an index (and therefore an index fund) will go even with or outperform most actively managed funds. With a sufficiently long investment horizon, which you have, these may be ideal for you. Trading in ETFs is also typically cheap because they are traded like stock. There are plenty of low-fee online brokers and virtually all will allow trading in ETFs. My broker even has a list of several hundred popular ETFs that can be traded for free.  The golden rule in investing is that you should never buy into something you don't understand. Don't buy individual stock with little information: it's often little more than gambling. The same goes for trading platforms like Loyal3. Don't use them unless you know their business model and what they stand to gain from your custom. As mentioned I can trade certain funds for free with my broker, but I know why they can offer that and how they're still making money." "There are probably 3-4 questions here.  Diversification - A good index, a low cost S&P fund or ETF can serve you very well. If you add an extended market index or just go with ""Total market"", that might be it for your stock allocation. I've seen people with 5 funds, and it didn't take much analysis to see the overlap was so significant, that the extra 4 funds added little, and 2 of the 5 would have been it. If you diversify by buying more ETFs or funds, be sure to see what they contain.  If you can go back in time, buy Apple, Google, Amazon, etc, and don't sell them. Individual stocks are fun to pick, but unless you put in your homework, are tough to succeed at. You need to be right at the buy side, and again to know if, and when, to sell. I bought Apple, for example, long ago, pre-last few splits. But, using responsible a approach, I sold a bit each time it doubled. Has I kept it all through the splits, I'd have $1M+ instead of the current $200K or so of stock. Can you tell which companies now have that kind of potential for the future?  The S&P has been just about double digit over 60 years. The average managed fund will lag the S&P over time, many will be combined with other funds or just close. Even with huge survivor bias, managed funds can't beat the index over time, on average. Aside from a small portion of stocks I've picked, I'm happy to get S&P less .02% in my 401(k). In aggregate, people actually do far worse due to horrific timing and some odd thing, called emotions."