An older man is laughing while cradling a smiling boy in his arms.
Retirement

What to look for when choosing investments

There's only one more decision to make before opening an account: choosing investments. Here's what to think about.
3 minute read

Costs

Like houses and cars, investments cost money. Low-cost investments help you keep as much as possible for your retirement.

See why investing costs are so important

Mutual fund

A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds are typically more diversified, low-cost, and convenient than investing in individual securities, and they're professionally managed.

ETF (exchange-traded fund)

A type of investment with characteristics of both mutual funds and individual stocks. ETFs are professionally managed and typically diversified, like mutual funds, but they can be bought and sold at any point during the trading day using straightforward or sophisticated strategies.

Diversification

This is a fancy way of saying "spread out your risk." You know, don't put all your eggs in one basket.

For example, you could hold stocks from thousands of companies through a mutual fund or ETF (exchange-traded fund). That way, if one company's stock price plummets, it will barely reflect in your account balance.

If you're not interested in digging into the details of every option out there, we'd recommend mutual funds or ETFs that cover the complete U.S. stock, U.S. bond, international stock, and international bond markets.

(As a guideline, put about 30% of your stock money in international stocks and 20% of your bond money in international bonds.)

Mutual funds vs. ETFs

Both of these types of investments are diversified and professionally managed.

ETFs can also offer trading flexibility and other benefits, while mutual funds may have account options that aren't available with ETFs.

Compare ETFs vs. mutual funds

Index fund

A type of fund that seeks to track the performance of a particular market index by buying and holding all or a representative sample of the securities in the index, in the same proportions as their weightings in the index.

Active fund

A type of mutual fund or ETF (exchange-traded fund) that seeks to outperform the return of a particular market index (for example, the S&P 500 Index) by buying and selling securities in a way that will maximize gains, based on a combination of in-depth research, market forecasting, experience, and expertise.

Index vs. active investments

If you're thinking of choosing mutual funds for your account, think about whether you want index or active funds.

Compare index funds vs. actively managed funds

Where does retirement fit into your priorities?

See how to juggle multiple financial goals

Explore professional advice

We offer expert help at the low cost you'd expect from Vanguard.

Compare advice options


We're here to help

Talk with one of our investment specialists

Call 1-855-850-6972

Monday through Friday
8 a.m. to 8 p.m., Eastern time

Ready to start?

Open a retirement account


We're here to help

Talk with one of our investment specialists

Call 1-800-231-2364

Monday through Friday
8 a.m. to 8 p.m., Eastern time

Ready to start?

Open a retirement account

Use our handy tools

You're putting money away for your future, but how do you know if it will be enough?

See if you'll have enough to retire

Roll over your retirement money

Did you leave retirement savings behind at an old job? Get more flexibility and easier money management.

See if a 401(k) rollover is right for you

Open a Vanguard IRA®

Find out how an IRA can help you start saving—and get tax benefits—today!

Learn more about IRAs

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.

The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.