JD Student,
My opinion: don't even try to understand all those mutual funds. There's no good reason to own more than about five funds...once you go beyond that you're likely adding a bunch of overlapping funds that add complexity to your portfolio without adding any real diversity. Investing in a bunch of unnecessary and overlapping things is a common thing financial "advisors" do to make investing look too complicated to do on your own.
Everything seems to be down over last few days for a total loss of ~7K. Which, while only a little over 1%, feels like a ton as that is almost a full year of law school tuition post scholarship. Should I wait for a rebound to liquidate and move to index? Is a single index acceptable?
Thanks all
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The short answer to your question is, don't do anything because the market moved. Index is fine but you have time to learn what you're doing first, you don't have to rush just because of the market.
The full answer is: the market is going to bounce around the rest of your life but rarely, if ever, does it provide a good reason for doing anything. You can make much better decisions by focusing on 1) your life situation and 2) investing fundamentals.
Basically, your life situation for investing purposes consists of your:
a) demographics (age, education as a proxy for earning ability)
b) finances (income stream; in debt vs have cash; are renting vs do you own a home)
c) family situation (single vs married, do you have children or other dependents, do you want kids)
d) and personal goals.
Investing fundamentals will include:
e) what different types of investments are there
f) what are their costs and benefits and unique characteristics
g) how to select good versions of a particular investment
h) how to select the right investments for a given life situation.
The Jhcollins stock series gives an overview of investing fundamentals that is focused on stocks because that is likely to be a relevant focus for your life situation. Jhcollins' series is uniquely clear and helpful in combining investment fundamentals plus application to real life. It and many members of this board, including me, would likely conclude in your shoes that moving to index is a good solution for your life situation, but you need to learn the fundamentals and decide for yourself. To Collins' series, I would add the following remarks:
i) Bonds/cash/bank savings are good at protecting against recessions and deflation.
j) Real estate (some prefer gold), including rental property and Real Estate Investment Trusts, can provide some protection against inflation.
k) Annuities cause great debate in some forums but I think most people in this forum would agree are not likely good for you, treat with caution; can be safely ignored for now IMHO.
l) Life insurance is not an investment, no matter how much a salesperson says it is. You probably know it's just protection in case an income provider dies, and remaining family needs financial support; just mentioning this to be thorough in case you discuss with advisors.
m) Stocks/mutual funds/ETFs provide participation in economic upswings, but can fall rapidly in recessions
n) The main thing about a diversified portfolio with several of the above investments is that it keeps you secure under all circumstances, or at least have something that goes up when the other investments go down
o) Collins will focus on stocks; decide for yourself whether to diversify, research accordingly. For diversification, there is a great website called portfoliocharts.com that shows what the historical result of various diversification methods would have been; a fellow MMM participant runs it. There are several threads in the MMM forums discussing whether diversification vs all stocks is better, and what type of diversification is better if any. There will never be complete consensus on these issues, I just want to you have access to a good summary of the viewpoints. I'd still start with Collins - very readable.
In any case, once you know investing fundamentals, you will decide on an investing strategy that suits your life situation. Your strategy will include periodic adjustments (such as, you can do these in one afternoon per year) to respond gradually to market conditions. You will not need to follow the market outside that afternoon, IMHO.