Investing


Hey Meow, How do you Invest?

Personally, I use my two favorite styles of investing: dividend investing, and index fund investing. For my retirement accounts, I picked index fund investing. I also have a taxable account where I am a dividend investor.

When I was younger and less informed, I simply had a regular brokerage account. After reading some great books and doing a little math, I realized the effect that taxes are going to have on my fledgling stash as it tries to grow. So I am focusing on investing within special retirement accounts called an IRA and a 401(k), where my savings can grow without being disturbed by Uncle Sam.

What I do might not be quite for you. Everyone has a different risk tolerance and time frame.

How do I get Started Investing?


I suggest meeting with a financial advisor to talk about your specific situation, but if that financial advisor tries to steer you towards high fee front loaded mutual funds, run far away! That's someone who is trying to make a buck off of you, not help you!

In addition to meeting with a financial advisor, you should do everything you can to educate yourself on investing. You're here, which is a great start. But there are so many wonderful resources out there. I've linked to some great books and blogs throughout this page.

The more you read, the more familiar you will become with concepts and terms. As you grow more familiar, you will grow more comfortable.

When you are ready, you can set up an IRA at any bank or financial institution. You can contribute to a 401(k) through your employer, or, if you are self-employed, you can make a Self Employed 401(k). 


Some Different Styles of Investing

 

Index Fund Investing / "Three Fund" / Boglehead


This is the most foolproof way to invest, and the way that requires the least amount of effort. Index fund investors rarely check their accounts. Stocks go up and down, but the long arch of the market reaches towards gains over the decades. Index fund investing is like a crock pot. You put your ingredients in, then "set it and forget it".

One of the most popular finance bloggers recently wrote a book, and it's already become a classic. It's called The Simple Path to Wealth by JL Collins and it's one of the best books out there for someone to go from total newbie to confident, informed index fund investor.


The theory is simple: Instead of picking and choosing individual stocks and hoping you chose the right ones, get a fund which is a mash-up of little bits of ALL the stocks - or all the stocks in a certain industry, over a certain size, or from a certain country. This is called an index fund.

Harness the power of the long haul as an index fund investor while minimizing taxes and fees and you've become a "Boglehead"- after Jack Bogle, founder of Vanguard, who brought index fund investing into the mainstream.

The Bogleheads are a ferocious crowd, and like to talk about how all of the other investing styles are baloney.

Index fund investing, as a popular thing to do, is relatively new, because computers make it easy to take little bits lots of different stocks and stick them together into a fund. But the data that it is based on goes back over 100 years.

While Vanguard was built by Jack Bogle for this very purpose, you can also use other brokers like Fidelity or Schwab. This is a long-long-long term strategy, which is why I use it in my retirement accounts.


Articles to come:
Why Index Funds?
The Three Fund Portfolio


Value Investing
Value Investing is when you find companies that are trading at lower than their intrinsic value, and buy those. Of course, figuring out the intrinsic value is the big question. You have to be able to read a company's financial statements, learn about its management, and make value judgements about its assets- not exactly beginner material.

A lot has been written on how to do it, which I'll have fun exploring in the coming months.

 

Dividend Investing
Dividend Investing is about picking stocks that spit out cash. This is definitely a fun and satisfying way to invest because you see your progress every month! You don't worry about the up and down movements of the market as much, because why worry about how fat your chicken is, as long as it's laying great eggs?

 

Meow's Dividend Journey
Join me on an excruciatingly slow but epic quest to replace my paycheck with dividends!  At the end of every month I look back and see what dividends came through. I've been saving for several years now, and making these reports help me keep the eyes on the prize. Anyone can become a dividend investor: I know some people who own one stock and get 22 cents in dividends per year.

Meow's Dividend Journey Update: April 2017: $97.57
Meow's Dividend Journey Update: May 2017: $100.02
Meow's Dividend Journey Update: June 2017: $146.58


Disclaimer: Everything I write is my own personal opinion and not to be taken as advice. Nothing I write is a recommendation to buy anything, sell anything, or take any specific action. I'm not an adviser, and I'm not YOUR adviser, so do a lot of research and get second and third opinions before making a big decision.

2 comments:

  1. I'm all about dividend investing. Became a DGI almost ten years ago and haven't looked back. Look forward to following your dividend journey.

    ReplyDelete
    Replies
    1. Thanks for stopping by Keith! Ten years of Dividend investing - wow, that's a lot of compounding!

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