Four-Part Series: Investing Basics

 

I am so fortunate and happy to create this detailed 4-part series on investing basics for the absolute beginner. The entire four parts are available immediately by clicking on the links below. You can pick the part which interests you. For those who need a refresher on basic investing allocation tables can jump to Part 3 and 4. If you require a refresher on how to make sense of the financial industry, start with Part 1.

My late husband, Dan, and I have spent many years learning how Wall Street works for our benefit. That’s an important distinction. We’ll tell ya a little secret: Wall Street is not that difficult to understand, once you know which gazillion parts to ignore. Part 1 shows how to see through all of its distractions and focus on two of its important assets: stocks and bonds. That’s it.

We have discovered the inner workings of the financial industry through the prism of a couple of regular consumers and eager to share with you. Book recommendations, additional financial blog sites and investment forums are listed at the end of Part 4. Throughout the four parts, we linked to advanced reading on topics that are too complex and lengthy to discuss in this article. I hope you enjoy it as much as Dan and I did creating this extensive blog post.

Best of fortunes,

Steve (with Dan when he was alive and assited in writing this blog post).

Table of Contents

Part 1 Contents. Words for the Financially Wise: Power of “Overlooking.”

• Defining:
  1. Savings
  2. Speculation
  3. Investments

• The Rest of the Article focuses on Investments: Stocks and Bonds.

Part 2 Contents. Explaining Wall Street. The road to Stocks and Bonds is paved with simplicity.

• The Stock Market
• Stocks
• How the Stock Market Investments are Organized
• 27 Million Businesses in the United States, but only a few thousand corporations are available for investing
• Going Public
• Share Prices
• Six Core Asset Classes that every portfolio should contain:

1. Large Cap

2. Mid Cap

3. Small Cap

4. International, the World Stock Market

5. The Bond Market

6. Cash/Liquid Assets

Summary

Part 3 Contents: The Rationale behind the Crucial Stock/Bond Allocation Split and Rebalancing.

• Your Tolerance for Risk and Your Age
• Bonds-by-Age Rule in Allocation Models
• Exceptions to the Bonds-by-Age Rule
• Vanguard Portfolio Allocation Models
• We adhere to the Bonds by age rule for one good Reason
• Rebalancing the Portfolio
• Target Date Funds are popular with 403(b), 401(k) and 457(b) plans
• Primary Goal of Rebalancing: Reduce Risk and Hold On to Investment Gains

Part 4 Contents: Putting it all together

• Finding the money to build wealth: Paying yourself first through your tax-deferred retirement plan.
• Ignore Emotions (or be mindful of your resistance to save and ignore it)
• Many Don’t Get Long Term Thinking and spend every penny they earn NOW!
• This Evolutionary Thinking about human adaptability is worth a second look
• Do you need a budget?
• Investment Goals
• Constructing A Portfolio that Grows
• The Mutual Fund Industry:

1. Load vs. No-load

2. Actively Managed vs. Passively Managed

3. Sectors

• The Prospectus
• Introducing the Passive Strategy with Index Funds
• Locating the specific investments and investment companies
• Why we invest in the Vanguard Group:

1. The Vanguard Group has $4.7 Trillion in Assets!

2. Index Funds

3. Very Low Fees!

4. 20 Million Investors! Not all of these people can be wrong.

 

• Portfolio Example for a 75-year-old Investor
• Portfolio Example for a 25-year-old Investor
• Words to the Wise: Be Patient
• Fee-only Financial Advisers Professional Organizations:

1. Garrett Planning Network

2. National Association of Personal Financial Advisers (NAPFA)

• Lazy Portfolio Authors’ Websites for Additional Portfolio Samples
• Bogleheads Investment Forum
• Be Wary of K-12 School District 403(b) and 401(k) plans.
• Additional Reading

Waiver: Steve Schullo is not licensed financial or investment advisors, and the information and experiences shared as do-it-yourself investors contained herein is for informational purposes only and does not constitute financial advice. Throughout my blog, I share my experiences with finances as ordinary consumers, not as a professional. Do not start, change or modify your portfolio based on the information in this blog post alone. Any ideas, investment strategies, links to fee-only professional advisers and particular investment companies discussed in this article or in this blog are a reflection of my experiences and should not be construed as a recommendation for any particular investment or strategy. Consult with a tax or financial professional.