Investing: For Beginners

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Barry Barnitz
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Investing: For Beginners

Post by Barry Barnitz » Sun Mar 11, 2007 4:38 pm

(contributions needed)

In an attempt to bring organization to this topic, we will likely be moving and rearranging posts. Rest assured that your contributions will be attributed to you if and when they are moved.

Vanguard offers a fine series of Plain Talk brochures that provide an excellent introduction to the world of money and finance. Here are some publications to get one started on the road to financial freedom.

1. Get A Financial Start
Basics on budgeting, debt, saving, and formulating an investment plan

2. How to find the right place for your cash
Your options for cash savings

3. Investment Basics
An introduction to the investment markets, mutual funds, and how to design a diversified portfolio of investments

4. Create Your Investment Plan
This booklet shows you a simple, five-step method for creating an investment plan.


Additional Information about Vanguard can be found at our Topic About Vanguard and its Founder.

An additional fine introduction to investing can be found in Laura's two posts, and Emerging Doc's Guideline Rules:

1. Investment Planning
2. Asking Portfolio Questions
3. Emerging Doc's Guideline Rules

John Bogle's time tested tenets on investing can be found in Paul Crafter's compilation of The Twelve Pillars of Wisdom.


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Summary of Vanguard's and Bogle's advice (with links)

Post by Barry Barnitz » Tue Mar 20, 2007 10:07 pm

(contributed by fundtalker123)

Many people seek advice on this board. Rather than giving my opinion, I thought it might be nice to try to summarize (and give links to) the advice given by Vanguard and Vanguard Founder John Bogle:

-Vanguard gives investment planning advice here:
link: How to create your investment plan

-Some reasons you may want to invest with Vanguard are here:
link:Why invest with us
(Note: if one does not have access to Vanguard funds, e.g. in their 401k plan, one can still follow this advice (see below*)

-Suggested asset allocations (selecting the right balance between Stock and Bond funds) and historical returns:
link: Vanguard Model Portfolios

-Some reasons to consider investing in Index funds:
link: Active management and indexing
link: John Bogle on Mutual Funds

-A simple one-stop-shopping approach is to purchase a single "Vanguard Target Retirement" fund:
link: Vanguard Target Retirement Funds
-These funds give you a mix of stocks and bonds that are automatically balanced and adjusted over time as your age increases

-Another simple approach, recommended by Vanguard founder John Bogle, is to invest in a mixture of the following two low-cost index funds:
1. Total Stock Market Index Fund
link: Fund Snapshot
2. Total Bond Market Index Fund
link: Fund Snapshot
-It is often best to hold as much as possible of the Bond Fund in tax-advantaged accounts (e.g. IRA, 401k).

-One may also consider investing a portion in an International Stock Fund, such as:
3. Vanguard Total International Stock Index Fund
link: Fund Snapshot
-John Bogle recommended putting up to 20% of the Stock Fund allocation in such a fund, although he has said that 0% International is fine for most people.

-When splitting your investments among several funds, check the percentages invested in each fund every year or two and consider buying and selling shares as needed to maintain the desired balances

*Footnote on Non-Vanguard Funds:
-If Vanguard Funds are not available (for example in your 401k) one can look for roughly equivalent funds offered by another firm, e.g.:
1. Fidelity Spartan Total Stock Market Index Fund
2. Fidelity US Bond Index Fund
3. Fidelity Spartan International Index Fund
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Book Recommendations for Beginners

Post by Barry Barnitz » Tue Mar 20, 2007 10:29 pm

Forum members have suggested the following titles for consideration by novice investors.

>Orthos (3/11/07) suggests:

The Lazy Person's Guide to Investing by Paul Farrell is a great 1st very basic book.

>Cyberbob (3/11/07) adds:

orthros wrote:The Lazy Person's Guide to Investing by Paul Farrell is a great 1st very basic book.

I liked that book too. But basic doesn't mean simplistic. Basic can actually be deceptively sophisticated, as seen in this latest Jonathan Clements article.
Jonathan Clements wrote:That's why I favor building a globally diversified mix of index funds. You might put, say, 45% of your portfolio in an index fund that tracks the broad U.S. stock market, 15% in a foreign-stock index fund and 40% in a bond-index fund.
Your index funds will simply replicate the performance of the underlying markets, minus a small sum for fund expenses. Sound dull? You may be more excited when you look at your results -- and you realize they're so much better than those earned by optimistic, hard-working active investors.

Bob

Oops...didn't finish.

I was going to add that most people will never read a bunch of investment books, so if you only read one in your life, it should cover a lot of important topics in an easy to manage manner. For that, I would recommend:
Making the Most of Your Money -Jane Bryant Quinn

>shadowrings (3/12/07) offers the following selections:

Complete Idiot's Books these listed are generally all decent introductory books. (Though I haven't seen the 401k one yet.)

Complete Idiot's Guide to Money for Teens
Complete Idiot's Guide to Personal Finance in Your 20s & 30s
Complete Idiot's Guide to Personal Finance in Your 40s & 50s
Complete Idiot's Guide to 401(k) Plans

>JoeInvestor1954 (3/13/07) suggests:

Best introductory book on index fund investing:

Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros

>Tim Dex (3/14/07):

I think Burton Malkiel's primer on investing, "The RandomWalk Guide to Investing," is a good starting point. Not long, very well written, has enough to get a beginning investor started. (Note: Not the same as his other Random Walk book.)

I also think Jack Brennan's book, "Straight Talk on Investing," is extremely good for beginners. A little more detail than the Malkiel primer, but not at all hard to follow.

For an online guide, try "pkcrafter's" Investment Guide at:

www.investingessentials.blogspot.com

Tim
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Investment Strategies for the 21st Century

Post by gatorking » Sun Apr 15, 2007 11:12 pm

This online book was my introduction to smart investing, so it will always be special to me.

Investment Strategies for the 21st Century

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Straight Talk on Investing

Post by bob90245 » Sun Sep 16, 2007 9:07 am

My favorite investment book to recommend to beginners is Straight Talk on Investing by Vanguard Chairman and CEO Jack Brennan. He wrote this book specifically for beginners in mind.


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