Investing for Beginners
You’ve never invested and you know you probably should, but you have no idea where to start. What should you invest in? How do you know if your portfolio is balanced? What even is a portfolio?!
Calm down… I’ve got you. I was in the exact same place as you before I read Simran Kaur’s “Girls that Invest,” but I’ve never heard it explained this way and it all makes so much more sense to me now. I’ve summarized the most helpful (in my opinion) part of her book below, and I hope it helps you as much as it helped me!
Key Elements of the Gold-Standard Investing Portfolio (aka - what to invest in)
Broad US Market Index ETF
Think Vanguard 500 Index Fund ETF (VOO) or Vanguard Total Stock Market Index Fund ETF (VTI). The US market holds some of the world’s largest companies and biggest brands. These funds are good to have in your portfolio because they’re less risky than some others, although not entirely risk-free. Other examples include SPDR S&P 500 ETF Trust (SPY) and SPDR Dow Jones Industrial Average ETF Trust (DIA).
Broad International Market Fund ETF
This fund has over 7000 stocks from 47 different countries, both developed and emerging. The diversification is STRONG, but it can be a little more volatile due to the inclusion of emerging markets. Examples include Vanguard Total International Stock Index Fund Admiral Shares (VTIAX), Fidelity International Index Fund (FSPSX), and Fidelity Emerging Markets Index Fund (FPADX)
Bond ETF
Having bonds in your portfolio significantly decreases your risk. It also lowers your reward, but it’s worth it to have security of the bonds! An example of this is the Vanguard Total Market Index Fund ETF.
How to Balance Your Portfolio
Do your own research and make sure you’re doing what’s best for YOU, but typically the higher your risk tolerance, the more stocks you’ll want in your portfolio. The lower your risk tolerance, the more bonds you’ll have. This graphic is an example of the portfolio of an investor who doesn’t mind taking some risks, so it’s heavier in the stock department.
Play it Safe
And this is an example of the portfolio of an investor who wants to play it a little safer. If you’re older, this may be the strategy you lean toward due to a shorter time horizon of investing. Not sure what your risk tolerance is? Take the decade of your age, subtract it from 100, and put that percentage toward stocks.
For example: if I’m 32, I would take 30 from 100 (100 - 30 = 70) and then put 70% of my portfolio into stocks and 30% into bonds.
Once you’ve figured out your portfolio, the next step is to sit back, relax, and watch your investments grow. Want some help getting started? I’m no financial advisor but I’m always happy to give some pointers. Set up a 1:1 meeting with your favorite financial coach (that’s me) and you’ll be feeling more confident in no time!
