Editor: Crass Cash
For those of you who are intimated, ignorant, or scared of investing, I'm going to make it really simple for you. You only have to buy three things. That's it 3!
Thanks to a man by the name of John Bogle who has championed the ETF (Exchange Traded Fund) over the "managed" mutual fund, it is now to set up your investments and only mess with them once a year. And when I say mess with them I mean only do it in order to reallocate your funds.
In order to get a well diversified group of ETF's you need only stocks for your home country (domestic), international stocks, and then bonds. I would say that a lot of financial adviser would advocate doing this, but the real arguments could get started concerning what the allocation should be.
I'm going to outline a plan for myself and I'm going to show you the pitfalls for more conservative investors.
-Here are the ETFs I would invest in: VEU, VOO, VUSTX.
-I would put equal amounts into VEU and VOO right now, with nothing into VUSTX. I would do this because VOO is overvalued in my opinion and VEU is undervalued. VUSTX is the bond fund and I consider that too be very overvalued. Even more importantly since I'm relatively young I can afford to take more risks.
-As I got older and the domestic market becomes less valued, the international market becomes more overvalued, and the bubble in bonds pops than I will transfer more probably 1/3 into each fund.
*If you can't stand to watch part of your portfolio drop by %50 and you're afraid that you would sell out of panic than you don't need to be in any stocks funds. Instead you need to have all of your money in bond funds.
*Note that bond funds can lose money, but if you keep them until maturity you won't lose money, unless of course they default.
*SUPER SUPER EASY PLAN - If you're ok with a potential stock market dropping by 50% or more and you don't care about making the most amount of money as possible, but you still want a good return. Here's what you do. Invest 33.3% of your money into each fund equally. As you get older than 33 years of age make sure that your age is the percentage that is invested in VUSTX. So if you're 40, than make sure 40% of your total portfolio is invested in VUSTX. If you're 50 years old, than 50% should be. If you're almost retired at 66 than 2/3 of your portfolio should be in VUSTX.
Thanks to a man by the name of John Bogle who has championed the ETF (Exchange Traded Fund) over the "managed" mutual fund, it is now to set up your investments and only mess with them once a year. And when I say mess with them I mean only do it in order to reallocate your funds.
In order to get a well diversified group of ETF's you need only stocks for your home country (domestic), international stocks, and then bonds. I would say that a lot of financial adviser would advocate doing this, but the real arguments could get started concerning what the allocation should be.
I'm going to outline a plan for myself and I'm going to show you the pitfalls for more conservative investors.
-Here are the ETFs I would invest in: VEU, VOO, VUSTX.
-I would put equal amounts into VEU and VOO right now, with nothing into VUSTX. I would do this because VOO is overvalued in my opinion and VEU is undervalued. VUSTX is the bond fund and I consider that too be very overvalued. Even more importantly since I'm relatively young I can afford to take more risks.
-As I got older and the domestic market becomes less valued, the international market becomes more overvalued, and the bubble in bonds pops than I will transfer more probably 1/3 into each fund.
*If you can't stand to watch part of your portfolio drop by %50 and you're afraid that you would sell out of panic than you don't need to be in any stocks funds. Instead you need to have all of your money in bond funds.
*Note that bond funds can lose money, but if you keep them until maturity you won't lose money, unless of course they default.
*SUPER SUPER EASY PLAN - If you're ok with a potential stock market dropping by 50% or more and you don't care about making the most amount of money as possible, but you still want a good return. Here's what you do. Invest 33.3% of your money into each fund equally. As you get older than 33 years of age make sure that your age is the percentage that is invested in VUSTX. So if you're 40, than make sure 40% of your total portfolio is invested in VUSTX. If you're 50 years old, than 50% should be. If you're almost retired at 66 than 2/3 of your portfolio should be in VUSTX.
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