I’ve been on an HSA+HDHP for a couple of years now and only realized recently the interest earned from investing HSA money is also tax free, so I want to start investing a part of my savings and see how it goes. I have 2 options, Betterment or Mutual Funds. I figured I’d try the latter to avoid fees, but I’m not sure which funds to choose. My HSA currently provides 30 fund options.
I see people mentioning Vanguard a lot so I spread out my initial investment into 25% chunks across 4 different Vanguard funds. How did I choose them? Well I literally just looked at the performance graphs and selected the ones that historically went up steadily without major dips. As a total noob, how can I improve my choices? Is there a simple way to decide without having to dive deep into the stock market?
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We’d really need to know what the 30 options are, to recommend one.
But I’d really recomend against it. The point of an HSA is to have cash available for medical expenses and emergencies. Over the long term (decades) index funds do consistently trend up. But on any given day, you never know. Money you were expecting to be there might not be. Now you’ve got a whole other problem.
If you have more money than you can imagine needing in the HSA, pick something with slow consistent growth and low or zero volatility.
Thanks for the advice. Yup, I realize health funds shouldn’t be gambled, that’s why I’m taking a conservative approach and just investing a small % of my HSA. I’m at a point right now where I have enough funds for current health needs and emergencies (my current HDHP coverage is pretty good), so I’m just dipping my toes with increasing those funds via other avenues.
And for the 30 options, I’ll post back here when I get back to my desk.
A total market fund, or S&p 500 fund would be a good start. Pick something with a low percentage fee
100 percent this. Anything SP backed is gonna be safe. Unless you can do a CD, some have good rates of like 4-5 percent. T-bills tend to be too low yield for me tho.
Never say safe, especially with the S&P it is a risk and people should understand that, but for most people who predict being able to hold for a long period it works.
Go for whatever is the most diverse, without dipping too heavily in any one area.
Thanks. What does “diverse” mean in that context? I split it equally into 4 chunks, although all Vanguard. Do you mean I should also put it into non-Vanguard mutual funds like Schwab, etc.? Vanguard is like 10 of the 30 of my options to choose from.
You can have it all with one brokerage in one fund and still be diversified. Suggest reading up on the 3 fund portfolio or boggle head.
S&P 500 is top 500 US companies. Many folks consider that diverse. You can also probably find a US Total Market fund. That will be even more diverse as it will include small and mid size companies in addition to the top 500.
Alternatively, even more diverse would be a Total Market fund. These typically include international companies, and represent the biggest diversification you can get.
No need to worry about Vanguard versus Schwab . The underlying stocks of the fund is what matters.
