Disclaimer:

This website presents the ideas and thoughts of a friend. The information contained within should not be used to make investment decisions. Please contact a licensed certified financial planner before making any financial decisions.

Good Luck, and Good Investing.

     
 

Once again, I am not a financial professional and my recommendation should not be given much weight. Don't trust anything I say.

My opinion should be one of many opinions you use to create your own financial plan.

 
     
 
 
 

 

  
 

Here are my thoughts on picking stocks.

I don't believe anyone can do it on a consistient basis. I believe the laws of random chance guide the day to day volitility of the stock market. I believe that a monkey would have as good a chance of picking a winner today as the best stock picker in the world. What I also believe as well however is that the long term performance of the stock market is not guided by random chance but rather by the phantom laws that govern the market. Those laws say that over time the stock market will go up. I may be right or I may be wrong. There are a lot of stock pickers out there that disagree with me. People a lot smarter than me in fact. They think you can pick winners in the short term, but I don't believe it.

My belief that the market will repeat past performance and go up over time is the principal that guides my investment strategy. My investment strategy is to invest in well diversified low cost index funds and ride the market. I will never beat the market, (the goal of all stock pickers), but I will never lose to the market either. I prefer to take out the risk of losing to the market by simply riding the market. Please do not follow my stategy unless you do your own research and come to the same conclusion about the market that I do
 
     
 
 
     
 

Because all situations are different, I can't just tell you what I do and expect that to be the plan for all, it doesn't work that way. A financial plan is typically based on two factors, age (or really time until you start withdrawing) and risk tolerance.

The more risk you are willing to take on, (risk means that your investment may go down in value), generally the more heavily you are invested in the stock market. The less risk you are willing to take on, the more heavily you are invested in the bond and/or fixed income market like money market accounts and C.D.'s 

Because I am just 37, and will not need my investment as an income until I am at least 62, I am 100% invested in the stock market. Some people will tell you that is too high but I am extremely diversified throughout the worlds stock markets through low cost index funds and I am confident that the market will repeat the past.

If you are 62 and will begin taking withdrawls soon, you may want to have just 30% of your money in the stock market and 70% in the bond market. If you do not know how to make this decision, you need to get help. I would start at the Vanguard web site under planning and education and learn what is generally accepted as far as planning for retirement. If you can't figure it out, I recommend you hire a FEE ONLY financial planner to help you get set up. They will help you choose the company that best fits your needs and they will help you establish what funds to invest in based on your age and risk tolerance. You will probably be able to go once every few years and maintain a very solid portfolio. If you really aren't comfortable with a fee only adviser, visit a company like UBS or Merril Lynch. For a percent of your assets, they will manage your money as well.

 
     
 
 
     
 

My advice on which company to invest with is very simple. If you are going to start a 403(b) you should start a 403(b)(7) with Vanguard. Of all the advice I give, that is the one that I am most confident in. There are issues with Vanguard though that you will need to consider.               

Vanguard is one of the, if not the, least expensive company to invest with in America. But that doesn't come for free. Confused yet? Vanguard is the place to invest if you are willing to take control of your finances. There is no one at Vanguard for you to go sit down with and have them plan out your financial future. There are no salesman to come visit you at school or at your home and help. As a financial salesman said to me the other day, "low fees equals low service," and he is absolutely right. I however have taken the time to learn about investing, (it's not that complicated by the way), and I don't need someone to help me plan out my financial future. I don't need someone to hold my hand and tell me it's going to be alright when the market turns. Therefore, I invest with Vanguard because I can get the same exposure the stock market that I can get at any other financial institution, only I get it for less.

Vanguard does offer financial help over the phone, but they keep costs down for the intelligent investor by not employing salesman and maintaining service centers throughout the country.

 
     
 
 
     
 

Let me use an analogy to teach you about what I think are the differences between Vanguard and the insurance companies. Imagine you are shopping for a new T.V. and there are two stores in town that sell T.V.'s. Store A and Store B. Store A is glitzy and has a slick salesman that greets you when you walk through the door . He asks you questions to find out exactly what T.V. you want and need and he walks you over to the T.V.'s and shows you all the models. He will even help you carry it out to the car. By the way, at Store A you have to buy the extended warranty whether you want to or not.              

The other store is very neat and clean, but there are no salesman. You can call the store and talk to customer service but there is nobody to help you at the store. You have to walk in the store and find your own T.V. among the very organized T.V.'s in stock.

                  The Glitzy store by the way charges 300% more than the one without salesman. Which store would you go to? That is not a typo by the way. I really meant 300%, sometimes even more.                  

Personally, I am going to do my own research on T.V.'s. I am going to read about T.V.'s on the internet from a number of sources. I am going to find out which T.V. fits my needs best and I am going to Store B. I don't need some salesman pushing me to buy a particular T.V. I already know exactly what I want. How do I know he really has my best interests in mind anyway? How do I know he isn't trying to sell me a more expensive T.V. because he makes more if he sells me more . Maybe he is really trying to help, but if he works on commission, how do I really know for sure?               

For me, the only way I know I am getting what I really need is to become an expert on T.V.'s and do it myself. But that's me. Maybe you enjoy the VIP treatment of the salesman. Maybe you enjoy the glitz, bells and whistles. Maybe you trust the salesman, and if you get ripped off you don't care. Me, I care. I don't want to get ripped off, and I know the only person I am sure has my best interests in mind is me. Might I make a mistake, absolutely, but so might they, and I prefer to be in charge.

                

Needless to say Store A is the Insurance Company and Store B is Vanguard. Vanguard is for people who want to take control of their financial future. The Insurance companies make you buy the Variable Annuity whether you want to or not and they charge upwards of 5 times as much as Vanguard for a similar product.

 

  
     
     
 

Like me, if you are ready to take control of your financial future. And you want to be absolutely sure that no one is ripping you off. And you only want to buy what you want, not some grossly over-expensive add on . Then you are ready to make the switch to Vanguard.