Getting Started with a Simple Investment

[Kletakin]

I have a basic understanding of investing, but not more than that.

I haven't yet had much to invest, but now I have a $1,000, and starting in January, I expect my income to go up by 20%, so I might have another $2,000 each month.

That said, I would like to start small, with up to "medium" level risk. Investment period is a year, or a few years, or more.

I am interested in the S&P 500, it averages 10% a year, from what I have read. Risk exists, but it's relatively small, and is expected to adjust over time.

My questions:

1. Sounds reasonable? Any other suggestions that are simple?
2. Getting started -- I have two bank accounts, and I think CapitalOne 360 offers investment brokerage (that's one of my banks), but anyhow what you do recommend? Some services offer a "bonus" of some sort, but those appear to be fairly small amounts, from what I have read.

I'm not a stupid person (actually an expert in my own field) but I want something simple to get started here. I am a family man, old enough (older that than even) to remember Y2K. :)

[Heckler]

https://www.bogleheads.org/wiki/Investment_policy_statement

Start there, focus on writing down your Investment objectives, time horizon, and risk tolerance.  $1000 you need to spend in a year is very different than $3000/month needed in “or more” years.

And make sure to have an EF covered first. Your $1000 S&P500 could be worth $500 six months from now.

https://www.bogleheads.org/wiki/Emergency_fund

[Heckler]

https://investor.vanguard.com/investment-products/etfs/profile/voo

S&P500 is a 4/5 rating on the “more” risk/reward scale - not relatively small, although it does fall into one of the simplest investments out there. 

[JAYSLOL]

Welcome! Agree with looking into the Investment Policy Statement to give yourself some guidance on how to proceed, and definitely check out the Investment Order thread in this forum. You’ll want to make sure you have a full emergency fund before investing any money going forward, then you’ll want to work out which type of account is best for you to invest in. Assuming you are in the USA, and assuming your goal for this investment is retirement, you’ll likely first want to max any workplace 401k where you get an employer match of some kind if applicable, then typically your next best option is a Roth account like a Roth IRA. When you have your Investment Policy Statement squared away you’ll have a good idea what kind of time horizon and what you’d actually be comfortable investing in. Easiest is a low-fee target date index fund that matches when you expect to need to start withdrawing money, most people here use the lowest possible index funds and do the rebalancing themselves, but to get started there’s nothing wrong with a target date index fund (just avoid the target date mutual funds the banks peddle with their high MER fees)

[Telecaster]

I'm not a stupid person (actually an expert in my own field) but I want something simple to get started here. I am a family man, old enough (older that than even) to remember Y2K. :)

Great news!  When it comes to investing, keeping it simple is a superpower.   I recommend reading the excellent investment order post:

https://forum.mrmoneymustache.com/investor-alley/investment-order/

After that, a good old low cost S&P 500 index fund is a great choice.   

Edit to add:   I should say, good old low cost S&P 500 index fund is a great choice to start out with.   Eventually, you'll likely want to diversify.   But there is no rush.   If you aren't sure what to do, index fund is the answer.

[Freedomin5]

Another recommendation for the Investment Order thread linked above. Simple, step-by-step, and easy to follow.

If at all possible, make sure your investment period is in the "or more" territory.

[MustacheAndaHalf]

I am a family man, old enough (older that than even) to remember Y2K. :)

Y2K didn't crash the internet, although the dot-com crash totaled many internet stock portfolios.  Valuations were unsustainable.
As a word of caution, S&P 500 valuations right now are 3rd highest, and could be 2nd highest in a matter of months.
https://www.multpl.com/shiller-pe

You could look into the Bogleheads Three Fund Portfolio, which adds bonds and international stock to the S&P 500.  Larry Swedroe has written a dozen or so investment books, and advocates value and small cap emphasis in a portfolio.

"The Bogleheads' Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk" (Taylor Larimore)
"The Only Guide to a Winning Investment Strategy You'll Ever Need" (Larry Swedroe)

[MDM]

Adding one more link to the many good ones already posted: Getting started - Bogleheads.

[EliteZags]

open a Roth IRA and max that first before starting a taxable brokerage acct
(backdoor Roth with Traditional IRA first if >income limit)


https://a.webull.com/BBx2nG9ORrzuKDlrr1 Webull will match 3.5% on IRA contributions


https://join.robinhood.com/josephz239 Robinhood matches 3% contributions with Gold membership(1% without), up front and deposited in Roth so untaxed bonus

you can still contribute to the $7K 2024 Roth max up til April 2025, then max the 2025 limit which would earn close to $500 in total match bonus. Could contribute large chunks at a time and hold in cash or something like SGOV to earn interest then DCA it into VOO gradually

[RWD]

I have a basic understanding of investing, but not more than that.

You should read through the JL Collins Stock Series:
https://jlcollinsnh.com/stock-series/

[ChpBstrd]

Lots of good advice above. My only quibble is with the following assumption:

I am interested in the S&P 500, it averages 10% a year, from what I have read. Risk exists, but it's relatively small, and is expected to adjust over time.

To understand what you mean by calling the risk "relatively small" I would need to understand your definition of "relatively small". The S&P500 once lost 20.47% in one day. In 2008 the S&P500 had a total return (dividends included) of negative thirty seven percent. In 2000, 2001, and 2002, the S&P500 lost -9.1%, -11.89%, and -22.1%, respectively.

If those are acceptable risks, and you're thinking over the long term, then by all means invest in the S&P500 (i.e. buy VOO or SPTM). However, be very careful about the typical trap new investors fall into. They invest when everyone else is doing it, suffer a 10% or 15% loss of value, sell everything, and then stay out of the market as it rises 20-30%.

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

So many new investors have this algorithm built into their heads: They'll always sell for much less than they paid if that's what the market is offering. And they will stay away if stocks have gone down recently. Therefore, according to this algo, every market dip must become a permanent loss, and no market recovery can ever be participated in. How are you programmed?

[VanillaGorilla]

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

If you bought BND in Jan 2008 you'll have enjoyed a 0% return in the ensuing 17 years. That would be far harder for me to stomach than short term fluctuations.

For OP, I would read the MMM blog, JL Collin's book, and some other information on index investing, and start buying equities. VTI or VFINX or equivalents are great, then educate yourself to control your emotions. That is, buy, and never sell. Successful investing is an emotional challenge, rather than intellectual.

I would recommend one of the big household brokerage houses, such as Vanguard, Fidelity, or Schwab. Read up on taxes - follow the investment order and make sure you're not paying more than you need in taxes.

[MustacheAndaHalf]

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

If you bought BND in Jan 2008 you'll have enjoyed a 0% return in the ensuing 17 years. That would be far harder for me to stomach than short term fluctuations.

You're ignoring the income from that bond fund.  Income, not price changes, provides most of the total return for bond funds.  When I multiply the total performance of $BND from 2008 to 2024, I get +56%.  Not zero.  It is also worth noting that 2022 was the worst year for bonds in many decades.  From 2008 to 2021, $BND performance was +68% over 14 years.

https://finance.yahoo.com/quote/BND/performance/

[VanillaGorilla]

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

If you bought BND in Jan 2008 you'll have enjoyed a 0% return in the ensuing 17 years. That would be far harder for me to stomach than short term fluctuations.

You're ignoring the income from that bond fund.  Income, not price changes, provides most of the total return for bond funds.  When I multiply the total performance of $BND from 2008 to 2024, I get +56%.  Not zero.  It is also worth noting that 2022 was the worst year for bonds in many decades.  From 2008 to 2021, $BND performance was +68% over 14 years.

https://finance.yahoo.com/quote/BND/performance/

Maybe you're quoting nominal returns? I based my assessment off the Portfolio Visualizer tool, with real returns.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=2Ije0hnlyUFqZcFTKYYVY4

[MustacheAndaHalf]

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

If you bought BND in Jan 2008 you'll have enjoyed a 0% return in the ensuing 17 years. That would be far harder for me to stomach than short term fluctuations.

You're ignoring the income from that bond fund.  Income, not price changes, provides most of the total return for bond funds.  When I multiply the total performance of $BND from 2008 to 2024, I get +56%.  Not zero.  It is also worth noting that 2022 was the worst year for bonds in many decades.  From 2008 to 2021, $BND performance was +68% over 14 years.

https://finance.yahoo.com/quote/BND/performance/

Maybe you're quoting nominal returns? I based my assessment off the Portfolio Visualizer tool, with real returns.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=2Ije0hnlyUFqZcFTKYYVY4

You're earlier post quoted a "0% return", not a "0% real return".

And again, excluding the recent high inflation years, you'd see a 4.2%/year return, or 2.5%/year in real terms, from 2008-2020.

[ATtiny85]

To invest right now, you need to commit to holding no matter what - even if we do get three years in a row of watching your investment lose value, or even if there is a sudden financial crisis. Look at history, do the math, visualize the red on your screen, and ask yourself if you can hold. Because if not, you are better off in bonds (e.g. BND, AGG, or LQD).

If you bought BND in Jan 2008 you'll have enjoyed a 0% return in the ensuing 17 years. That would be far harder for me to stomach than short term fluctuations.

You're ignoring the income from that bond fund.  Income, not price changes, provides most of the total return for bond funds.  When I multiply the total performance of $BND from 2008 to 2024, I get +56%.  Not zero.  It is also worth noting that 2022 was the worst year for bonds in many decades.  From 2008 to 2021, $BND performance was +68% over 14 years.

https://finance.yahoo.com/quote/BND/performance/

Maybe you're quoting nominal returns? I based my assessment off the Portfolio Visualizer tool, with real returns.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=2Ije0hnlyUFqZcFTKYYVY4

You're earlier post quoted a "0% return", not a "0% real return".

And again, excluding the recent high inflation years, you'd see a 4.2%/year return, or 2.5%/year in real terms, from 2008-2020.

I also can't name a single person that I know or have read about, that made their only BND purchase in Jan 2008, so these types of one-and-done date picks never do much for me. Similar to the folks who keep Japan on quick draw for equity.

I also think 2023-2024+ might turn out to be the best time ever for my investing career to be buying a large amount of BND. I was 95+% equity back in 2008, maybe 85% in Jan 2022 right as we started our glidepath to our 65% where we are now. We have bought a bunch of shares at a nice discount, at least compared to a few years ago, though who knows what the next few years will bring. Could end up having been fortunate timing. Will have to check in in 25 years.