So, to get the basics out of the way, I know that you are not my financial advisor and that I invest at my own risk.
With that said, what is best for a person with no experience investing? I have been reading a little about “robo advisors” and am thinking that might be my best bet. I was reading https://www.nerdwallet.com/blog/investing/best-robo-advisors/, and Wealthfront seems like a good choice. I think robo advisors might be my best bet because they cost less than a human and is much less work for me than doing it myself. But I am opened to ideas. And because I know it is needed to give me advice, I am 36 and have over $20,000 in an account waiting for me to figure out how best to use it. And I have a 401K from work.
If anyone with knowledge in this area can give me advice, or point me in the area of good info for someone unfamiliar with investing, that would be a great help. Thanks
This isn’t just advice for those uncomfortable with investing.
Warren Buffett, probably the most successful investor of our time, recommends this to everyone. In fact, he placed a $1 million bet with a hedge fund manager that his index investment would beat their expertly managed portfolio over a decade.
I haven’t used it yet, but M1 finance offers free investing. Stock symbol SPY is a fund that mirrors the S&P 500, with a .09% expense ratio. Buy the latter through the former, and you are invested in the equivalent of the market as a whole, at a very low cost.
OP, what is your 401K invested in? And how long until retirement?
For $20K with a while until retirement an index fund is the cheapest option. When you get closer and/or have more you might want to balance things better.
I’ll be 55 in a few days. About six months ago I moved things into much more conservative investments. Given the last few weeks, I’m glad that I did. I didn’t see this coming. I just did it because I’m relatively close to retirement.
People have mentioned two brokerages, but you can get one all sorts of places. I’ve got one through USAA’s banking side. I could get one through my credit union as they’re part of a large network. It’s a piece of cake overall. Just find one that offers the product you’re interested in with requirements that suit your situation.
Also check your tax situation to make sure that a Roth makes sense for you. If you expect to be withdrawing at a higher tax bracket, it makes sense. If you want to be able to withdraw some or all of your initial post-tax investment (any gains or dividend re-investments are locked in and withdrawal will cause penalties and a taxable event) at any time if needed without penalty, it makes sense.
I meant the OP, but congratulations. I’m 67, and over the past year or two I’ve moved a good bit of my aggressive equity portfolio into more stable income producing stocks. My portfolio has gone up in value a bit this year (not counting the past two days, though) even though I’ve been living off of it.
I expect the markets to crash. I don’t know if this is it, but it will happen, and all the talk about the strength of the economy sounds a lot like 2000 and 2008. I’ve been through this movie before.
Our credit union has a financial advisor who will work with members. We made an appointment when I retired in 2011 because we didn’t know what to do with my TSP (Fed equivalent of 401k) and a few years later, we had my husband’s 401k. Neither of us was interested enough to do our own research, and we’re fiscally very conservative. Dave took care of us. We’ve got 2 annuities and a CD and while we’ll never be wealthy, we will be comfortable.
It may not work for everyone, but if you’ve got a credit union account, or can join a CU, it might work for you, too.
Set up an automatic transfer to move a little more money in every month - whatever you can afford. This will get you “dollar cost averaging” - you buy high, and you buy low - so when you sell, you are less likely to take a bath.
At some point you may wish to diversify - bond funds as you age. Utilities for income. Picking up individual stocks as part of a “collection” like people collect purses or beer cans or art or coins. Growth stocks because “what the hell.”
Mostly good advice in the responses above. Things to remember -
[ul]
[li]Over your working career, markets will fall several times (three times for me). Ignore them and people who talk about them. In particular ignore those who say “I got out just in time.”. For each of those, there are many who got out too early or too late. Stay invested and keep buying.[/li]
[li]Over the decades you will work, markets will tend upward. Index funds will too.[/li]
[li]Put a little away from each paycheck via direct transfer. If it never hits your checking account, it is harder to spend.[/li]
[li]Each time you get a raise ask yourself “Do I need to spend what I didn’t have last month?” - put the raise (or most of it) into your investment account. Same if you get a bonus.[/li]
[li]Fees, whether to managed (non-index) funds, advisors or for stock trades can have a big cost. Learn about them before relying on them.[/li]
[li]IMHO, Vanguard is a good firm to start with, they make it pretty effortless to get started.[/li]
[li]Start investing as early as you can. Don’t worry about lack of knowledge - start with a low-fee S&P500 index fund - then learn as you go. [/li]
[li]This free book is a good, free read - If You Can by William J. Bernstein (PDF).[/li][/ul]
Also, many (most?) of those who claim to have “gotten out just in time” almost certainly missed the bounce-back. Because usually after a big drop, there is a big jump.
It’s worth noting that for the 17-year period from 1966 to 1982, the S&P 500 had an inflation-adjusted return of 0%. At today’s valuations this could easily happen again (or worse).