The best company to open an investment account is Vanguard. Vanguard provides industry's lowest cost index funds. Plus, their website is very easy to use. If you agree to get electronic statements, your yearly maintenance costs are zero. Vanguard lets you set up automatic investment schedules on a regular frequency.
If you are just getting started, you need ONLY three index funds in your portfolio. Each of these funds require $3000 as initial investment and after that you can invest $100 as minimum on a regular frequency. If you can afford to invest in all three funds all at once, then by all means do that. If you can't, then you can buy one fund at a time as you save money.
Funds
Total Bond Market Index Fund (VBMFX)
This fund provides broad exposure to U.S. investment grade bonds investing about 30% in corporate bonds and 70% in U.S. government bonds of all maturities (short, intermediate, and long-term). As with any bond fund, as interest rates rise, bond fund value will decline; and as interest rates decline, fund value will increase.
Total Stock Market Index Fund (VTSMX)
This fund provides exposure to the entire U.S. equity market, including small, mid, and large-cap growth and value stocks. This fund is a great way to gain broad exposure to the U.S. stock market. Generally speaking, stocks are more volatile than bonds; but their volatility also presents more opportunities for growth.
Total International Stock Index Fund (VGTSX)
This fund provides exposure to both developed and emerging international economies. The fund tracks stock markets across the entire world, minus the United States. Because it invests in non-U.S. stocks, including those in developed and emerging markets, the fund can be more volatile than a domestic fund. This fund provides diversification as you are investing in the whole world and not just the US.
Asset Allocation
Once you purchase these funds, you may want to work on your asset allocation depending on your age, number of years remaining till retirement, and your own personal risk appetite In general, more risk means more reward. But, you should take only the risk you can afford to take. If you are in your 30's, you may want to allocate 20% to bonds, 40% to US stocks, and 40% to International stocks. If you are in your 40's, then your allocation may be 20% to bonds, 45% to US stocks, and 35% to International stocks. These are just examples, but you can make your own asset allocation. Later on, you can tweak your asset allocation by investing more in one fund versus other funds. One piece of advice is that don't sweat too much on allocation because, over time, you will have opportunities to change it by shifting money from one fund to the other during re-balancing Key is to get started, and start investing in quality funds that you would invest for a long period of time.
Conclusion
Buy & Hold investing is not rocket science. You just need to stick to your long term goals and not get affected by short-term market swings. The three index funds mentioned here cover the entire universe of stock and bond markets. In essence, your money is fully diversified. I hope this post inspires you to start investing. Take that first baby step and leave rest to the markets.
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