As someone who has a career in finance, I often get surprised we don’t teach that topic in our schools. Only recently some colleges have started to do this, as a mandatory subject
Someone asked: What should I do if I have 12k in savings and I want to invest? It’s is a very good question and the amount could be anything: from 2k to 200k. In this blog, I will assume that you have taken care of all basic needs such as rent, bills, and debt payments. This way we can just focus on investing. Things to consider before you start:
In other words, how much can you stand to lose out of the original amount you have invested? Many in the financial press say that the stock market over the long haul has returned an 8% yearly growth on the average. While this is true “on the average over the period of many years” it doesn’t mean that each and every year the stock market will be up by 8% always. Over the short term, stocks are quite volatile. You could see one or more years of negative returns. You could see a year that is up by 15% followed by a year that is flat or down. The point I am trying to make is that many people can’t handle this type of volatility and seeing their account bounce around and lose value on any given year. They may panic and pull entirely out of the stock market at the wrong time. So how much stomach do you have for market swings?
Are you interested in learning about this by reading journals and magazines on your own? Do you like being glued to CNBC on a daily basis? Or are you the type that is totally hands-off and just park your money and hope for the best.
Beware of scams, newsletters and all-day seminars that promise you riches and financial independence in 3 easy steps. As far as I have seen it doesn’t exist. Investing over the long haul is actually a lot of grunt work.
Before you start investing in anything you really need to consider carefully the above questions.
So now let’s turn to some investing ideas which depend on one’s risk tolerance ranging from more risk down to less risk
100% of the invested amount in the SPY Etf: Gives exposure to the entire S&P500 or
100% in QQQ: Gives exposure only to the technology sector in the US or
100% VT: Gives exposure to US and international stock markets
Gives exposure to both US stocks and bonds
100% BND: Gives exposure only to various segments of the bond market in the US. No stock market exposure at all.
Of course, the above are just some very basic recommendations. If someone is really interested in investing, they should do their own research and also bounce around their ideas with financial professionals they trust.
And here is a disclosure in case the SEC is reading this: This is not investment advice it is rather an opinion piece and it is only incidental to my regular profession.