Awakening

Wow, I came back. It's February 1st, 2013, and I came back..  I feel like I'm speaking to my past self.  It's kind of revelating.  I'm 29 years old, and I feel like my life is in good shape, so what I tell you should be beneficial to you, because I've proven that I've survived, and not only survived but happily married and with some money in my name.

I came back to this blog not only to check into myself, but to tell readers about the way to invest, which is such an important time in life.
In order to answer to such a thing, I have to warn you.  I've made mistakes.  I've bought stocks.  Hell, I've bought penny stocks.  I've seen the greed in me.  The calling.  The feeling like "Oh my God, this stock has gone up 50% in the last 3 months, and I missed it!  I've also felt the "OMG, this stock is going to go up!  The  financial say it will and so do the experts", and it doesn't.

Hey what I'm an advacate of, and what the best route to go is a diversity plan.  Not only that, but I realized the power of dividends, and make sure your dividends are used to buy more stock.

In saying all of that, I will tell you the lazy portfolio that is better than the active portfolio.

These are some funds that you could have your whole life (maybe until your 53), and have some All Star Funds to help you reach your goal.

Here are the funds and the allocation:

30% Vanguard Total Stock Market Index Fund (VTSMX)

20% Vanguard REIT Index Fund (VGSIX)

15% Vanguard Inflation-Protected Fund (VIPSX)

15% Vanguard Long-Term Treasury Fund (VUSTX)

15% Vanguard Developed Markets Index Fund(VDMIX)

5%   Vanguard Emerging Markets Index Fund (VEIEX)

Enjoy!

Asset Allocation

So far everything I've posted is pretty basic knowledge, but I think it was necessary to start slow and work up to the more interesting stuff. I will begin explain about asset allocation and how to meet your goals. I’ll also give some of my personal recommendations on how to allocate your savings. Everything I recommend is something that I would do myself, and I will give full disclosure on any funds that I personally invest in and one's I do not.

Asset allocation can be one of the most important factors affecting the health of your retirement account. By carefully allocating and diversifying your investments, you can better withstand the ups and downs that come in the stock market. Matching your goals with understanding the basic principles of asset allocation and investing will help you to make an educated decision in selecting the strategy that is right for you.

I am personally an aggressive investor. What I mean by that is I pick mutual funds that are comprised almost entirely of stocks. I prefer this approach because there is a higher rate of return than the conservative portfolio, and I can withstand taking loses because of how much time I have left to save.

There are a couple different types of traditional allocation types that I’d like to touch on:

1. Large Cap – a mix of large companies (typically US).

a. Examples: Chevron, IBM, Coca-Cola

2. Mid Cap – a mix of medium companies (typically US)

a. Examples: Dollar Tree, Dick’s Sporting Goods, Chipotle Mex Grille

3. Small Cap – Do I really need to explain this one?

a. Examples: you probably haven’t heard of these ones.

4. Emerging Markets – a mix of companies mostly from Brazil, Russia, India, and China (BRIC), but other countries are also included.

5. Energy funds – Typically a mix of oil, natural gas, coal, nuclear, etc.

6. Tech funds – yep, you guessed it.

a. Examples: Dell, Nintendo, Google, Microsoft

7. Real Estate investment trust (REITs) – basically you are investing in real estate stocks (shocker)

8. Metals & Mining funds – A mix of funds invested in the value of precious metals and the profitability of mining them.

How you allocate is up to you, but I like to do something like this:

· 20-40% - large cap

· 15-30% - mid cap

· 15-30% - small cap

· Whatever you have left% - Emerging/Energy/Metals & Mining/REITs/Tech

Once you figure out how to allocate, you can get into individual fund selection. That will have to come in a future post. There is a lot of information out there about fund selection. I will list some websites for some expert advice and what to look for in a fund.

How to become a millionaire pt. 3

Ok, I thought I'd do a quick post to justify my title "how to become a millionaire"

Warning. This post will be includes actual numbers..... and maybe some math.

If you put $5000 a year in a Roth IRA and assume 11% return on your investment every year (the Lipper average) you will get the following:

Year 1 - $5,000

Year 2 - $10,550

Year 5 - $31,139

Year 10 - $83,610

Year 15 - $172,026

Year 20 - $321,014

Year 25 - $572,066

Year 30 - $995,004

Ok, I should change the post to "how to become a 900,000 aire" but you get the point. So you're 30 years old and plan to work till your 60. That's 30 years to save! And this is only your ROTH, add that to your 401K and your a millionaire. If your under 30 that's awesome! More time to grow

Year 35 - $1,707,948

Year 40 - $2,909,130

Good thing you didn't have to retire in 2007 and experience the recession. Now is a great time to get on board.

How to become a millionaire pt. 2

The purpose of this blog is to offer free advice to younger people to become wealthy enough to support themselves after they stop working. The previous post covered some of the basics of investing for your retirement, and now I'd like to offer advice on where to invest and how.

Investing in your retirement can be overwhelming. You won't be able to use the money you invest for a very long time, but it will pay off big and give you financial freedom later in life when you stop working! Woohoo!

There are many places to invest, and all places have different offers. Here are some examples:

Vanguard - offers low fees. you can only use their funds

Fidelity - typically has higher fees with a a large variety of funds.

American Century

John Hancock

The list goes on. Take your pick.

I personally use Fidelity and American Century. All of these are pretty good.

The hardest part is really just getting started.

Step 1. Open a Roth IRA account - should not take long at all, and can be done entirely online.

Step 2. Set up an auto-invest on a monthly or bi-weekly basis. Later on why this is important.

Step 3. Select the fund you want to invest in.

Give one of these websites a call and they will be happy to help with these steps.

There are two reasons why auto-investing is great.

1. You don't even have to think about investing, you just do it. Before you know if you'll have $5000 in your retirement! You're on your way!

2. Auto-investing enables you to do dollar-cost-averaging. This is an investing method that means you invest the same amount of money no matter what the market does. buy high, buy low it doesn't matter. It takes the guess work out when to buy, and it is a low risk way to invest. Congrats you are an expert without even trying!

So, what are you waiting for!?

Next post will be on fund selection!

How to become a millionaire

The goal of this blog is to give free advice to help people (preferably under 30) become millionaires by the time they retire. This goal may seem far fetched, but it is possible for a middle class American to retire and support themselves long after they stop working.

Why is this important? Social security is a joke and pensions are becoming a thing of the past. It is becoming increasingly important to take care of yourself financially. If you follow this blog, I will give you everything you need to know about securing your financial future.

Rules of thumb to investing:

1. As a rule of thumb you should invest 10% of your post-tax income

2. Believe that the stock market will always go up in the long term.... It is the American way.

3. Diversify your investments. Don't put all your eggs in one basket.

4. The best method to invest long term is mutual funds. Mutual funds are a collection of many different stocks. The stocks are chosen by the fund manager. Buy and hold.

Where to invest (in general):

1. Invest in your company's 401K. A 401K just means a selection of mutual funds that you pick using pre-taxed dollars. Your company typically matches a percentage of what you contribute. This is awesome. Take advantage. You pay the taxes on it when you take it out.

2. Invest in a Roth IRA. A Roth IRA is an account that you can put up to $5000 per year to invest in whatever you want. The key is that you do NOT pay taxes on your money when you take it out. Woohoo!

If you invest in your company's 401K and you personally invest $5000 per year in a Roth IRA you can become a millionaire by the time you retire. The earlier you start the better.

Help on selecting mutual funds will come in future blogs, but if you want a good starting point find an Index fund. An Index fund is a mutual fund that follows the Dow Jones industrial Average or the S&P 500 almost exactly (two very well know American indexes)

Please write with any questions you may have!