Once you’ve completed Step 1 and Step 2, you’ve secured an emergency fund and paid off your debt. The next step is to invest your money. But the big question is, where do I invest? Scenario: You have X amount of dollars you’d like to invest. You know you’re supposed to invest and from reading the blog posts here, you understand the best thing to do is to find index funds or ETFs with low expense ratios to carry out a 20-30 year investment plan.
But what exactly are you supposed to buy?
Thankfully future Financial Advisor, Nero, is here for you and I’ve compiled some options:
1. The Lazy Fund Portfolio
The Lazy Fund Portfolio is a simple way for the passive investor to invest their money. Buy 3 funds, then sit back and watch it grow over time.
From the wiki, I’d recommend a larger portion in anything US Stocks and a lower amount in bonds. Many of my investor colleagues who use the 3-fund portfolio have some variation of this asset allocation:
2. FREE SERVICE: Wealthfront
Are you looking for a little more diversification and asset reallocation in case of violent market swings? Wealthfront is a service I introduce new investors to if they’re looking to start. This is a new finance start-up that manages people’s money for a small commission per year. Here’s the freebie: if you have less than $10000 in your portfolio, the service is absolutely free! Everything over $10,000 is charged 0.25% for assets managed. Check out their FAQ section for more information.
Disclaimer: I am not endorsed by Wealthfront nor do I use this service. I manage my own investments. I figured this was a great way for people to start since it’s free.
3. Future Advisor
FutureAdvisor is another online wealth management service. This one does charge fees but it’s a great starting point on figuring out where to invest. Their tool let’s you type in “how much I want to invest” and then breaks down all the BUY and SELL orders on which funds you should be investing in. If you’re starting out your Roth IRA, you can put in $5500 and it’ll break down each asset for you.
Put in any dollar amount into their system. They take that number and tell you exactly what to buy and how many shares.
Take this information and go to your broker and place the orders if it aligns with your investment goals. If you’d like them to manage your money, they charge 0.5% on your assets managed which is double Wealthfront’s cost so I would rather go with Wealthfront if I were to choose a service strictly on fees alone.
Disclaimer: I am not endorsed by FutureAdvisor nor do I use this service.
Before investing anywhere, be sure you do your due diligence. Avoid expensive funds with high fees. It’s always better to manage your own passive portfolio than to pay others to do the same thing, especially since most investors just buy index funds.
My example retirement portfolio can give you an idea of how a passive portfolio works. Remember that it is an example portfolio. If you decide to copy it, you’re doing so at your own discretion.