A decision guide for long-term investors who want to know where to put money now. It compares three ways to build a portfolio core, shows what fund costs and mistimed trades actually subtract using 2025–2026 data from S&P Dow Jones Indices and Morningstar, and gives you a written allocation rule you can act on this week.
This article is educational and general. It is not individualized investment advice, and it does not account for your tax situation, income, debts, or timeline. For decisions involving significant money, consult a fiduciary advisor or a tax professional.
Quick Answer
There is no universal buy list. For a long-term investor, the decision that drives most of the result is asset allocation — how much you hold in stocks, bonds, and international markets — not which fund fills each slot. Pick a written split, fill it with broad, low-cost index funds, and rebalance on a rule. As of December 31, 2025, 79% of active US large-cap funds trailed the S&P 500 over the prior year.
Part I: The decision you’re actually making
The question “what should I buy right now” assumes the hard part is selection. It usually isn’t. The hard part is deciding what proportion of your money should sit in each broad asset class, then holding that decision through a market that will keep giving you reasons to abandon it.
Three pieces of evidence make the case for treating allocation as the primary decision.
Picking winners is harder than it looks, and it doesn’t persist. According to the SPIVA U.S. Scorecard from S&P Dow Jones Indices, 79% of all active large-cap US equity funds underperformed the S&P 500 in 2025 — worse than the 65% rate in 2024, and the fourth-worst year for active large-cap managers in the scorecard’s 25-year history. Over the 20 years ending December 31, 2025, about 93% underperformed.
The U.S. Persistence Scorecard adds the part that actually matters to a buyer. Among top-half active domestic equity funds in calendar year 2021, only a handful were still in the top half four years later. For large-cap funds, the persistence rate came in below what random chance would produce. So the selection problem has two halves, and the second is the hard one: you’d have to identify the outperformer in advance, and a strong recent record barely helps you do it.
Cost is the one input you control completely. Morningstar’s 2026 US Fund Fee Study, covering 2025 data, found the asset-weighted average expense ratio across US open-end funds and ETFs was 0.32%, down from 0.34% in 2024. The spread inside that average is the useful part: the asset-weighted average for active US equity funds was 0.58% in 2025, versus 1.00% on an equal-weighted basis. Broad index funds commonly charge under 0.05%. An expense ratio is the annual percentage a fund deducts from assets, taken automatically before you see a return.
Your own trading costs you too, though the size is genuinely disputed. Morningstar’s Mind the Gap 2026 study estimates that the average dollar in US funds and ETFs earned 8.7% per year over the decade ending December 31, 2025, against the funds’ own 9.9% aggregate return. Morningstar attributes that 1.2-percentage-point shortfall to the timing and size of investor purchases and sales.
Be careful with that figure. A 2026 paper in the Financial Analysts Journal, Bad Timing Does Not Cost Investors 15% of Their Funds’ Returns, challenges the methodology and puts the cost of poor timing nearer 0.10% a year. That’s a wide gap between two credible sources, and it isn’t settled. What both sides agree on is the direction: trading more has not helped the average investor.
One condition is worth naming, because it changes how much diversification matters right now. In its 2026 US equity outlook published in January 2026, Goldman Sachs Research noted that US market capitalization concentration was the highest on record, and that the largest technology companies accounted for 53% of the S&P 500’s return in 2025. If you own a US total-market fund, you already own that concentration. You didn’t choose it, and you can’t opt out of it without changing the allocation itself.
The three ways to build a core
Most portfolio structures for individual investors reduce to one of these. The criteria that matter are cost, how much ongoing work they demand, and how much control they give you over the pieces.
Option A: One-Fund Total-Market Core
What it is: One broad index fund covering either the U.S. stock market or the global stock market.
Best fit: New investors, people with small balances, and anyone who doesn’t want to maintain several funds.
Typical cost: Broad-market index funds are often available with expense ratios below 0.10% annually.
Ongoing work: Very little beyond making contributions and periodically confirming that the fund still fits your goals.
Main limitation: The fund determines your geographic exposure, and an all-stock version does not include bonds.
Main risk: An all-stock portfolio can lose substantial value during a market downturn.
What to verify before buying: Check the expense ratio, the index tracked, the markets covered, and whether the fund holds stocks, bonds, or both.
Option B: Three-Fund Portfolio
What it is: Separate broad index funds for U.S. stocks, international stocks, and bonds.
Best fit: Investors who want direct control over their stock-to-bond allocation and U.S.-to-international stock split.
Typical cost: A portfolio built with low-cost index funds may have a blended expense ratio below 0.10% annually.
Ongoing work: Review and rebalance the portfolio periodically, often annually or when allocations move materially away from their targets.
Main limitation: You must choose and maintain three portfolio weights.
Main risk: If rebalancing is ignored, market movements can cause the portfolio to drift away from its intended risk level.
What to verify before buying: Check each fund’s expense ratio, the total stock-to-bond allocation, the U.S.-to-international split, and any overlap among the funds.
Option C: Target-Date or Allocation Fund
What it is: One fund holding a preset mix of stocks and bonds. A target-date fund generally becomes more conservative over time, while a static allocation fund may maintain roughly the same mix.
Best fit: Retirement accounts and investors who want portfolio construction and rebalancing handled inside one fund.
Typical cost: Costs vary. The asset-weighted average expense ratio for target-date mutual funds was 0.27% in 2025, but investors should check the fee for the specific fund under consideration.
Ongoing work: Rebalancing is generally handled by the fund, but you should still review whether its strategy fits your circumstances.
Main limitation: The preset allocation or glide path may not match your actual timeline, financial situation, or tolerance for market losses.
Main risk: Assuming the fund will always remain appropriate without periodically reviewing its holdings and strategy.
What to verify before buying: Check the expense ratio, current stock-to-bond allocation, underlying investments, and—when applicable—the target year and full glide path.
The decision rule: if you will not rebalance on a schedule, buy Option A or C. If you want a specific bond weight or a specific international weight and you will maintain it, buy Option B. Do not buy Option B and then leave it untouched for five years, because unrebalanced weights drift toward whatever asset has run hottest — which is exactly the exposure you were trying to control.
The next check before you act: look at your account type before your fund choice. Money going into a workplace plan or IRA gets different tax treatment than money in a taxable brokerage account, and the sequencing matters more than the ticker. For 2026, the IRS set the 401(k) employee deferral limit at $24,500 and the IRA limit at $7,500, with an $8,000 catch-up for those 50 and older and $11,250 for ages 60 through 63.
Free-tier takeaway
The complete answer to “what should I buy right now” is this: decide your stock/bond/international split first, fill each slot with the cheapest broad index fund available in that account, and write down a rebalancing rule before you need it. The evidence supporting that answer — the SPIVA underperformance and persistence data, the fee spread, and the investor return gap with its methodological dispute — is all above. Nothing essential is behind the paywall.
What’s below is the execution: the worked fee math on a real balance, the account-funding order, exact rebalancing bands, a fund-screening checklist, and a one-page worksheet you fill in and keep.
