As part of my forthcoming portfolio strategy, I was trying to find information on the best S&P 500 Index funds. As you may or may not be aware, Vanguard created the first S&P 500 index fund in the 1970’s. An S&P 500 index fund aims at tracking the performance of the S&P 500, regarded as one of the best (if not the best) total market indexes out there.
If you have less than $50,000 to invest in securities you kinda get screwed. All of us here at InvestorGeeks are just starting out, in our Mid-20s and have less than $50k in investments. Now I love to learn about investing, but I’m nobody’s fool, and so I want to build a foundation of safe diversified funds until I master selecting value stocks. However, because of my low account balances, I get whacked with maintenance fees that can be pretty stiff. This is a problem because I’d like to diversify my portfolio, but lose more and more of my returns because of these fees. So I’ve come up with an action plan, and I’m hoping you’ll provide feedback before I go ahead an implement it in the next couple weeks.
I’ve become very interested recently in fellow investment blogger Phil Town’s site, and so I’ve been reading it from start to finish. After reading much of his site, I’ve come to enjoy his style of writing and investing. Ever the skeptic though, I wanted to make sure he’s not just some shill on the web hawking his wares to an unsuspecting public. Everything I found has been good, and I was even able to find a new resource that he recommends frequently called the INVESTools Investor Toolbox.
About Phil Town
It’s important when investing to pick your advisors carefully. I have kind of a rating system for investment advice.
Poor – Any guy on the web. Pay little attention.
Fair – What he says passes the reason test. I’ll listen skeptically.
Good – Good track record, good advice. I’m listening, but still fact checking.
So. I’ve been out of it for awhile, but I’m back now, and I’ll be making appearances here as I can. At the moment I have little or no free time, between work and planning my upcoming wedding. Which reminds me I still need a guest list. So without any further non-sense let’s get into this, and I’ll try and make something that’s rather drab and boring as informative and interesting as I can.
Last week Chris talked about the bond market. This week I’ll be talking briefly about the money market.
In The Intelligent Investor, Benjamin Graham encourages investors to divide their holdings among two broad types of investment: bonds and stocks. He recommends dividing an investors’ portfolio between them from 25% to 75%, depending on the investors’ financial goals. Because stocks provide all the glitz and glamour of Hollywood the most investors understand how they work (or at least they think so). However, bonds are the ugly understudy and as a result can be misunderstood.
Because bonds are supposed to play such an important role in our portfolios, this series of articles on bonds will take us through the basics of bonds, describe the type of bonds available, provide links to resources and lay the groundwork for us to begin investing in them. To begin the series we’ll start at the beginning: what are bonds? We’ll go over what they are, how they make money, and basic pricing considerations.
Relatively new investors may have heard about ETFs but are still unsure what they are. Well, ETFs, or Exchange Traded Funds, are a type of investment fund that is traded like a stock on the open markets, but typically track an index such as the Nasdaq-100 or S&P 500. First introduced in 1989, ETFs have grown in popularity over the last decade because of their ease to buy and sell, and low expense ratios. However, like any investment, there are pros and cons that the prospective owner should be aware of.
Over the long-term, the S&P 500 beats 80% of actively managed mutual funds (before tax benefits). Because of this fact, prominent investors such as Warren Buffett and Benjamin Graham recommend index funds for defensive investors and those looking to diversify their portfolio. Not only do they provide instant diversification, they also offer the benefit of being simple to own, as it represents owning an already established group of securities selected by finance companies such as Standard & Poor’s, Dow Jones and Nasdaq.
Jason and Chris have provided some excellent advice and guidlines when making investments this week. It’s imperative that you know what you’re investing in not only from a personal standpoint, but also from a market perspective. But that alone is not enough, it is imperative that you can differentiate between what you know and what you like. Failing to be able to do so will cost you in the long term.
Let me present 3 steps to making an investment decision:
Frank, Jason and I were having dinner this past Saturday and we were discussing future markets. Jason brought up Biotech and was talking about some of the possibilities for future advances, and how they may affect the industry. Now, Biotech is something I know very little about — in fact, I know almost nothing about it. As a result I probably am not going to invest in Biotech in the near future.
What follows is a question posed to us after Jason’s article last week. As well as my response to that question. I hope to have answered the reader’s questions completely, and I hope that my response proves valuable as well. I’ve left the response as is, and I’ll be covering different sorts of investments and other strategies in weeks to come, as I build my own confidence and knowledge. I’ll close with a few comments that cover some areas that I feel my original response did not adequately address.
I read your Savings Speech article today, and it was not unlike many time-value-of-money articles I have read in the past. I am curious, though, what type of investment you would expect to see an average 9% return from?
