“The perfect is the enemy of the good” — Voltaire

“I’m finally ready to begin investing, but I don’t know where to begin.  Stocks. Bonds. Mutual funds. ETF’s.  It’s all very confusing.  I have some cash in a savings account, but I want my money to work harder.  What do I do?”

The premise

Getting started with an investment portfolio doesn’t need to be difficult.  The following steps will take you to a solid, low-cost, easy-to-maintain portfolio.  You might not end up challenging Warren Buffett for the title of World’s Best Investor, but you’ll sleep well, and you won’t spend every waking hour worrying about your investments.

Well-managed index funds have low expense ratios, since you’re not paying anyone to scout out the world’s best companies.  All the manager does is maintain a portfolio of stocks or bonds as indicated by the index, whether it’s the S&P 500 or the MSCI EAFE.* Mutual funds (including index funds) give you a little bit of ownership of hundreds of companies.  If one company stumbles, you won’t lose too much money; conversely, your returns are not going to “hit it out of the park.”  The idea is to move up and down with the market, with the assumption that in the long run, there will be more up than down. Continue Reading »