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The Single Best Investing Move: Shift to a Low-Cost Index Fund

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  Published in Stocks and Investing on Saturday, December 20th 2025 at 8:29 GMT by The Motley Fool

The Single Best Investing Move You Can Make – A Summary of The Motley Fool’s December 20, 2025 Feature

In a November‑long series of “must‑know” investing insights, The Motley Fool’s December 20, 2025 article, “This Is the Single Best Investing Move You Can Make,” argues that the most powerful decision investors can take—whether you’re a seasoned portfolio manager or a casual saver—is to shift the bulk of your assets into a broad, low‑cost index fund. The article presents the argument in a step‑by‑step format, peppered with data, historical context, and a few concrete product recommendations that reflect the author’s deep belief in the long‑term superiority of passive investing.

1. The Premise: Index Funds as the Default Choice

The piece opens with a quick, hard‑hit statistic: since 1975, the S&P 500’s average annual return has been around 10% (adjusted for inflation). In contrast, the average active fund manager in the U.S. beats the S&P 500 only 55% of the time and, even when it does, the outperformance is usually swallowed up by higher fees. These points echo the long‑standing Fool narrative that “index funds beat the market.” The article then lays out the two main reasons why a broad index fund is the single best move:

1. Diversification – A single index fund holds thousands of securities, smoothing out idiosyncratic risk.
2. Cost‑efficiency – Fees are low (often below 0.1%), leaving more of the portfolio’s growth to compound over time.

The author cites a recent study (linking to a Wall Street Journal piece on passive vs. active management) that found active funds often underperform their benchmarks once the expense ratios are accounted for.

2. Why the Single Move Is Powerful

The article moves beyond the abstract to answer the nagging investor question: “What if I’m already invested in a few big tech stocks? Should I still buy a broad index?” The author counters with a simple math exercise: if you have 50% of your portfolio in a handful of tech names, those names will underperform the market roughly 60% of the time over a decade. By shifting that 50% into a diversified fund, the overall portfolio’s risk is drastically reduced while its expected return stays roughly the same.

The piece also discusses behavioral finance. During market dips, investors panic and sell high‑quality holdings. In contrast, the article argues that a broad‑based index fund, with its built‑in dollar‑cost averaging from regular contributions, naturally mitigates that emotional response. It cites a 2023 Financial Analysts Journal study showing that “investors who maintain broad market exposure during downturns tend to achieve better long‑term outcomes” than those who trade more aggressively.

3. Product Recommendations

To make the advice actionable, the article includes a short list of recommended funds. The key recommendations are:

• Vanguard Total Stock Market ETF (VTI) – Covers the entire U.S. equity market and has a 0.03% expense ratio.
• Schwab U.S. Broad Market ETF (SCHB) – Similar coverage, slightly lower expense ratio of 0.03%.
• iShares Core S&P 500 ETF (IVV) – If you prefer the S&P 500 focus, IVV offers 0.03% and is highly liquid.

The author notes that all three share a similar risk profile and are ideal for both lump‑sum and systematic (regular) investments. For international diversification, the article points readers toward Vanguard Total International Stock ETF (VXUS) (expense ratio 0.08%).

4. The “One Move” in Context of a Full Portfolio

The author stresses that the “single best move” is not a one‑size‑fits‑all solution but a strategic pivot. The article references a prior Fool post (linked in the text) titled “Build Your Portfolio in 10 Steps.” In that article, the authors outlined a “core‑satellite” framework:

• Core – 70–80% of the portfolio in low‑cost index funds (the single best move).
• Satellite – 20–30% in thematic or higher‑risk positions (e.g., ESG funds, small caps, or real estate).

By following this framework, you benefit from the low‑risk, high‑return profile of the core while retaining the potential upside of more focused bets in the satellite.

5. The Risks and Caveats

No article about investing is complete without a discussion of downside risks. The piece highlights three primary concerns:

1. Market Cycles – Even index funds can experience long periods of flat or negative returns. A disciplined, time‑in‑market strategy mitigates this risk.
2. Sector Concentration – While the S&P 500 is diversified, it’s weighted toward tech, financials, and healthcare. A truly broad index such as VTI spreads risk further.
3. Inflation and Interest Rates – Rising rates can compress equity valuations. The article recommends a balance of equities and inflation‑hedged bonds (e.g., TIPS) for investors in high‑rate environments.

The author also warns against over‑concentration in any single asset class. “Even the most diversified index can underperform a carefully chosen mix of stocks and bonds if your risk tolerance or timeline changes,” he writes.

6. Practical Steps to Implement the Move

The article ends with a simple, actionable playbook:

1. Assess Your Current Allocation – Use a free portfolio tracker or a spreadsheet to quantify what fraction of your assets are in individual stocks vs. broad funds.
2. Set Up Automatic Contributions – If you haven’t already, automate monthly or quarterly transfers into VTI, SCHB, or IVV.
3. Rebalance Quarterly – If your portfolio drifts outside the 70–80% core range, sell satellite holdings to restore balance.
4. Keep Fees Low – Opt for brokerage platforms that offer commission‑free trades on the recommended ETFs.

The article also recommends a “watch list” for those who want to keep an eye on top dividend‑paying companies or small‑cap growth stocks, but stresses that those should remain part of the satellite allocation.

7. The Bottom Line

In a concise yet comprehensive article, The Motley Fool reminds investors that while every investment decision matters, the single most effective move in the long run is to anchor your portfolio in a low‑cost, diversified index fund. By doing so, you combine the benefits of broad diversification, minimal fees, and a proven track record of beating active managers over multiple market cycles. The rest of your strategy—whether that involves thematic bets, bond allocations, or dollar‑cost averaging—serves to fine‑tune risk and return, but the core of the portfolio should be the humble index fund.

For those who want to read further, the article links to additional Fool posts on “How to Build a Low‑Cost Portfolio” and “Why Passive Investing Wins.” Those pieces dive deeper into tax‑efficient account types (IRAs, 401(k)s) and the nuances of rebalancing. Together, they provide a full blueprint for an investor who wants to make the best possible move in a complex market environment.