Author Topic: First Time Invester Options  (Read 2642 times)

Lightstream

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First Time Invester Options
« on: November 12, 2014, 03:48:13 PM »
I am about to invest a small amount of money to get things started. I am 27 years old and would like to invest aggressively (e.g., index funds) for future retirement and security. However, I have heard about the importance of Asset Allocation and diversifying a portfolio into different funds so that on any particular year one can still remain successful. I would like to go back to school for an MBA which would also be an expense, so I want to know where best to put my money (savings, fixed, or variable options). After reading Mr. Money Mustache's article about Betterment I became interested in putting some funds there. I would just like to know what others would recommend I do to start a portfolio. I currently have about $6,000 to start with. Any recommendations would be much appreciated!

ChickenMonster7

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Re: First Time Invester Options
« Reply #1 on: November 12, 2014, 04:07:14 PM »
If I were in your position, I would do 100% stocks. I would do 70% S&P 500 index, 20% Total US Market, and possibly 10% International Stock Index. I personally use IVV and ITOT. I would start reading about assets allocation now, and when you have more money to invest, apply it as necessary, but for now, i would keep it simple with only non-commission etfs through your broker.

pzxc

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Re: First Time Invester Options
« Reply #2 on: November 12, 2014, 04:24:15 PM »
Since you have a decent amount to get started with, and you want to learn how to manage your portfolio yourself, you probably should just open a Vanguard account and buy their funds.  It costs nothing to open an account, costs nothing to buy the Vanguard funds from a Vanguard account, so all you pay is the expense ratio on the funds themselves (about 0.1% for index funds typically).  With Betterment, you have to pay about 0.35% on top of the fund fees.

One thing that worried me about what you said:

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However, I have heard about the importance of Asset Allocation and diversifying a portfolio into different funds so that on any particular year one can still remain successful.

Even if you have a well-balanced, well-diversified asset allocation, *NOTHING* will guarantee that you will be successful in any particular year.  Trust me, even the most diversified investors lost money in 2008/2009.  It's just a part of it, and you have to be ready for it and NOT SELL when that happens to you.  In order to achieve a consistent average return of 7%+ in the market, you have to invest for the long term (15 years or more).

The people who get hosed, are the ones who get scared during a period like 2008/2009 when they see their portfolios lose half their value in a year, and then sell due to the fear. The ones who do NOT sell, well the value comes back -- in the case of the 2008 recession, you regained all you lost within a couple years. Now we're at new all-time highs again.  Which means people will be itching to invest again (because we're at alltime highs, everyone's making money, nobody wants to be left out).  Sooner or later, it will crash again, and those same people will get scared and cash out.  Meaning they "bought high" and "sold low".  Do not be one of those people.

You absolutely MUST have the fortitude to NOT sell, even if you have lost money over a year or longer period.  Otherwise, buy-and-hold index fund investing is not for you.

BEN_BANNED

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Re: First Time Invester Options
« Reply #3 on: November 12, 2014, 06:25:47 PM »
WiseBanyan might be an option for you if you're interested in Betterment.

It's basically the same thing as Betterment without the flash and dash and has absolutely no fees.

surfhb

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Re: First Time Invester Options
« Reply #4 on: November 13, 2014, 11:24:45 AM »
If you're 100% stock then you only need one fund:  total market or total world

Iron Mike Sharpe

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Re: First Time Invester Options
« Reply #5 on: November 13, 2014, 11:50:57 AM »
Are you definitely going back to school for your MBA?  Do you have to pay for it or is your employer paying for it?  If you are going to pay for it, and you are going to school in the near future, I'd keep the money in cash to pay for your education.

Lightstream

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Re: First Time Invester Options
« Reply #6 on: November 13, 2014, 04:28:47 PM »
Hopefully, I will be going back to school within the next couple years. I will have some financial assistance to pay for tuition as I am in the National Guard and will be receiving the GI Bill and tuition assistance. I am still going to save earned future income for school however.

Thanks all for the great advise!

Bikeguy

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Re: First Time Invester Options
« Reply #7 on: November 14, 2014, 05:18:24 AM »
I agree to get Vanguard and learn to balance your own.   I asked my friend,  who is a CFP, whether I should hire him.   He replied, "It's not rocket science."

Been saving the 0.80% he charges yearly.  Or, been growing my money 0.80% faster every year. Either is accurate.
« Last Edit: November 14, 2014, 05:21:45 AM by Bikeguy »