Investing

Stop Trying to Pick Stocks. Here's What to Buy Instead.

📅 May 2026 ⏱ 5 min read ✦ Get Rich Slow By Michael Azzolina · CPA · MBA

I build financial models for a living. I can run a discounted cash flow analysis, stress-test a balance sheet, and model out a company's unit economics down to the order level. I have spent 15 years studying how businesses make and lose money.

I buy index funds.

I understand the market well enough to know I can't consistently beat it. Neither can professional fund managers with full-time research teams and Bloomberg terminals. The data is clear: the vast majority of actively managed funds fail to outperform their benchmark index over any 20-year period. They have every resource advantage. They still lose. We also have day jobs.

What an index fund actually is

An index fund holds a slice of every company in a given index, typically the S&P 500 (the 500 largest U.S. companies) or the total U.S. stock market. When you buy 1 share of a total market index fund, you own a small piece of Apple, Microsoft, Amazon, and roughly 3,500 other companies, all at once.

The fund doesn't try to pick winners. It owns everything. When the market goes up, you go up. When the market goes down, you go down. Over long periods, the market has gone up: roughly 10% per year historically before inflation, closer to 7% adjusted.

You are not betting on any one company doing well. You are betting on the economy continuing to function. That's a substantially better bet.

The fee math is the part people skip

The difference between an actively managed mutual fund and an index fund often comes down to fees. Fees compound against you the same way returns compound for you.

$10,000 invested for 30 years at 7% return
Index fund (0.03% expense ratio) $76,100
Actively managed fund (1.0% expense ratio) $57,400
Cost of that 0.97% difference $18,700

The actively managed fund needs to outperform the index by nearly 1% every single year just to break even after fees. Most don't. You pay the fee regardless of whether they succeed.

This is the part of the financial industry that doesn't get said loudly: the business model of active fund management depends on you believing that picking the right manager is worth the fee. My understanding of the data is that it generally isn't. You pay the fee no matter what. The outperformance is not guaranteed and, historically, has not materialized consistently.

About 90% of actively managed large-cap U.S. funds underperformed their benchmark index over a 20-year period, according to S&P's SPIVA data. The ones that do outperform in one period tend not to repeat in the next.

What to actually buy

3 funds cover the vast majority of what most people need. All 3 are available at Fidelity, Vanguard, and Schwab: the brokerages I'd suggest starting with.

Total U.S. Stock Market Index Fund

Owns the entire U.S. market: large, mid, and small cap companies. The single fund most people need.

FSKAX · VTI · SWTSX

International Index Fund

Adds exposure to developed and emerging markets outside the U.S. Broadens the bet beyond one economy.

FSPSX · VXUS · SWISX

U.S. Bond Market Index Fund

Lower return, lower volatility. Becomes more relevant as you get closer to needing the money.

FXNAX · BND · SWAGX

The tickers above are examples of widely available low-cost index funds offered at major brokerages as of publication. They are not recommendations to buy any specific security. Fund availability, expense ratios, and structures can change. Verify current details at your brokerage before investing. Nothing in this article is financial advice tailored to your individual situation.

If you're in your 20s, a heavy tilt toward stocks makes sense. You have time to ride out downturns. A reasonable starting point is roughly 80-90% U.S. stocks, 10-20% international, and very little in bonds until you're closer to needing the money. Treat this as a starting point. Do your own research before acting on it.

The three-fund portfolio is not exciting. It will never be the thing that made someone rich overnight. It is also the strategy most consistently cited by financial economists, and the one most accessible to people who have other things to do with their time.

The honest version of this

There is an entire media ecosystem built around making investing feel active, complex, and urgent. Financial news channels need content every day. Analysts need to justify their salaries. Brokerages profit when you trade. None of those incentives point toward "buy a low-cost index fund and check it twice a year."

The boring answer is the right one. Buy the index, keep the fees low, stay invested through downturns, and let time do the work. That's the conclusion most serious investors arrive at eventually.

Some arrive at it after losing money trying to beat the market first. You don't have to.