I started investing at the tender age of 10. I was terrible with it at first. I lost most of my money due to insider trading and 9/11. I’ll tell that story next week.
Honestly, investing has never been scary for me. It’s very predictable over the long-term and it’s very easy to get started. What does scare me? The Nightmare Before Christmas.
I’m writing about my investment philosophy and specifically my investment accounts outside of my employer. My employer offers a Roth 401(k) and an Employee Stock Purchase Program. But not everyone has those and I want this to be more of a general chat about investing. Although the Roth 401(k) and ESPP function just as simply as my other accounts.
Lazy portfolios are cool
I refer to my investments as my ‘lazy portfolio‘ because that’s what they are commonly referred to when only a few funds are selected for long-term growth.
I have 2 accounts at Vanguard. 1 account is a Roth IRA, one is a taxable investment account. I fill the Roth IRA to its max of $5500/year ASAP. I have my checking account linked to the investment account and push the money over. If I sell something and have a $5500 influx of cash, I’ll throw it in all at once. I NEVER time the market – anymore. I used to and holy cow I just ended up wasting time and losing money. Dollar-cost averaging is the way to go and over the long-term that’s how my portfolio plays out. But no one knows where the market is headed. Getting your cash in the game ASAP means you’ll begin collecting dividends and the rest is up to luck.
My Roth IRA money is invested into one Vanguard domestic index fund with a high risk tolerance. I’m 24. I can wait out the market swings.
When my Roth IRA is topped-off, I begin chucking cash at my taxable. Here, I invest in mostly international funds. That way, I can take advantage of foreign tax credits. As a general rule, domestic funds go inside a Roth IRA, foreign stocks go outside.
I like to have a mix of 50% domestic, 50% international in my portfolio. That means I have to put some domestic stocks into my taxable to keep the proper ratio.
People also talk a lot about when to rebalance funds. I don’t ever sell and buy something else to keep my balance. Too much work. Instead, when my 50/50 ratio gets a bit off, I buy whatever fund (domestic or international) needs help to get back to the perfect balance.
Bonds… I don’t wanna talk about. ‘If you can’t say anything nice, don’t say anything at all.’
Welp, that’s pretty much it. Lazy portfolios FTW. Actively managed portfolios FTL. Here’s a fantastic video about why you should avoid them. Watch it. I didn’t even really want to when I first watched it and I found it immensely entertaining/informative.
Exactly what I invest in…
Oh, you may want to actually know where my money is parked! My portfolio is about 50% VTSAX and 50% VDMAX (but VDMAX is closed to new investors so if you’re looking to replicate my portfolio, VTMGX is pretty darn similar).
If you don’t have a big enough initial investment for a Vanguard mutual fund – nearly all of them have ETF alternatives.
But out of all this writing, remember… do not watch The Nightmare Before Christmas.
Also, invest early. Compound interest is the 8th wonder of the world.
Note: I don’t know if it’s true but the IRS seems to keep a close watch on young people with any decent sum of money. Maybe I’m just paranoid but they seem quick to call me out when something seems fishy. But both times they’ve contacted me, they made the mistake. So if you get a letter from them, don’t freak out like I did both times. Chances are, they just tripped up. Which honestly, how can you blame them! Taxes are freaking tricky!