How to Invest Simply

If you want to avoid the crazy-making style of investments, then focus on keeping things SIMPLE.

There are two ways to look at simple. One way is to keep things simple so that you can do it all yourself. This is totally doable—and not at all scary—in our digital world, and I’ve made some suggestions for you below. 

The other way to keep things simple is to hire someone you trust to give you advice and then make the transactions for you. Remember that you will pay for this service, but you may also be paying for a bit of peace of mind, which many people are happy to do.

More ways for you to make everything as simple for you as possible:

• Make the location simple. For people getting started with investing, my top three places to invest are Vanguard, Fidelity and Charles Schwab. (You can also try robo investors like Betterment or Wealthfront, but I tend to not like how they allocate investments – NO CONTROL!!! – but that’s me). Super easy online interfaces and plenty of no-load and transaction-free options. Plus, if you decide you need more help or support, each of these options can connect you with an investment manager.
• Make the investments simple. For diversification, you need a little of every asset class (which could be a whole separate post). To keep things simple, use a Target Fund, which is a mutual fund with a date in its name. You simply pick the date closest to when you want to use the money, and the fund company is in charge of managing the fund, diversifying across asset classes and rebalancing the money. Now, to be clear, I would recommend investments that DON’T use a Target Fund, because I think they tend to underperform a bit…but no one would be HURT by getting started there. But plenty of times, someone starts with a Target Fund and then when they work with us, we add a wee bit more sophistication to the investments.
• Consider your timeframe. The amount you invest in each asset class category depends on how soon you need the money. Soon? You shouldn’t be in the stock market. Ten plus years? Throw a little of your money into each category and you’ll be fine. You can go to anywhere you’re currently investing and find some good funds. I could make it more complicated, obviously, but this is a perfect starting point. Think of this like experimenting with a recipe…there is no “perfect,” it’s just a work in progress.
• Keep the maintenance simple. If you choose to use a Target Fund, you don’t even need to check up on it—the company rebalances the fund for you. If you choose individual mutual funds/index funds/ETFs, balances will go up and down over time, and to lock in gains, you have to sell when the fund value is high and buy when other fund values are low. This is called rebalancing. Some fund companies allow you to do this automatically. Otherwise, just make an appointment to move the balances back to their original positions every 12-18 months.

It helps to look at investing as you would look at ANY new thing you try: get in, experiment, and be okay with feeling out of your element for a while, until you start to see progress.

And if you’d like a little help, this is exactly the sort of thing we help you work out with financial planning. Click here to get more information.