Do you have money to invest? And now you want to know where to invest your money? I’m not a financial advisor. Please only take this information as educational and as entertainment. I’m going to tell you where to invest your money, based on where I invest my money.
First, I’ll tell you about me, then you can decide if you are more or less risky than me and then you can make your investing decisions based on our differences. Make sense? Here we go.
I’m 35 years old and I have a wife and two daughters. I’m the sole bread-winner and I’m self-employed. We have no debt except for the mortgage. My wife and I currently have around $150,000 in retirement funds. We got this money by living below our means and paying ourselves first. My goals are to provide a decent living for my family, possibly strike it rich with my business, and slowly build a retirement nest egg that I can live off of for 25 or so years.
I invest my money into two primary funds:
- Vanguard 2040 Target Date Fund (60%) – A managed fund invested in a variety of stocks and bonds that get more conservative as it draws closer to 2040.
- Vanguard Total Stock Market Index Fund (40%) – A straight-up index fund that invests in enough stocks to mirror the stock market.
I house these funds within a Rollover IRA (old 401K money) and within a Roth IRA, respectively.
I like these funds because they are simple, easy to understand, and they are low on expenses.
The target-date fund is where the majority of my holding are. The index fund is where my new money will go, until I can decide upon a new allocation. I’ll probably just move all of the money over to the target date fund.
I’ve chosen these funds because I’m in it for the long haul. As a 35 year old, I’m staring at 30 more years until I’ll have to retire and sit on my ass. Therefore, I’m not interested in moving my money in and out of the latest fad stocks. I want my money to see a modest increase over the 30 year period. It’s the get rich slow plan.
History has shown that you can count on stocks to give you a sizable return of 6% to 8%. If I can contribute $10,000 a year to my Roth IRA into those funds, then I should expect $1,623,388.08 (even at a modest 6% return) by the time I retire. That’s more than enough to live off of for 25 years.
It’s really that simple. I’m not interested in taking stabs at what’s hot, or trying to predict the market. I’m just going to bet on the fact that the stock market, and the underlying U.S. companies, are going to produce 6% return over 30 years. They did the last 30 years, and the 30 years before that. Who am I to say they won’t do it again?
To sum up my advice here: make your own investing decisions, but make sure you consider investing in things you can understand, things that line up with your goals (i.e. a secure retirement), things that are inexpensive, and hold these things in tax-advantaged accounts. Good luck.