Crucial Investing Strategies!

If you are like most people you’ve worked hard and you’ve managed to stash some cash away in your sock draw or your bank which might as well be you sock draw with all that interest it’s earning. You’d like to invest your money and secure that but you don’t want to pay some broker fat fees to babysit your money and you’re a little nervous to invest it yourself because you’re afraid you might lose your shirt. Today I’m going to show you how to take that cash out of your socks and put it into some stocks. I’ll show you how to create a broadly diversified portfolio using the latest investing theories the pros use in just a few minutes. I mean investing doesn’t have to be complicated, so let’s get started.

At its very simplest investing is a two step process. First you need to decide what type of investor you are a growth investor, a balance investor or maybe an income investor. Once you get that down I’ll show you a typical portfolio that may work for the level of risk you are willing to take.

Growth Investors - they’re like the adrenaline junkies of the investing world. They’ve got nothing but time and they’re primarily looking for long term growth of their investments, but this growth can come at a cost. Over a recent 12 year period a typical growth portfolio averaged about 10 percent with its best year up 27 percent and its worst year down 17. So growth investors need to be willing to ride the waves and tolerate a short term downside for a possible bigger upside.

Balance Investors – They are like the cool, I’m in no hurry but I’m no evil carnival types. They’re a little more conservative than a growth investor but they still want to benefit from that long term growth. They are primarily looking to reduce market volatility by including some income generating investments into their portfolio and in exchange they accept moderate growth.

Income Investors – sort of like the slow and steady wins the race types, they typically have a short time horizon a low tolerance for risk or possibly both. They aim for modest growth of their investments while generating income at the same time. Now take a quiet moment to yourself and decide what kind of investor are you?

Moving on.

Now that you have connected with your inner investing child and you know how you want to invest you need to decide what you want to invest in. I know, there’s so many ways to invest your money it’s easy to get overwhelmed but don’t. You can build a diversified portfolio using Exchange Traded Funds (ETFs). ETFs track asset classes or like domestic stocks, international stocks and bonds. So you can simply purchase one ETF per asset class. How hard is that?

Now the portfolios I am about to show you are only examples. OK adrenaline junkies here is a typical target portfolio for growth investors. Since you’ve got nothing but time and money and you’re willing to take the risk you can invest 69% of your money in an Investment Total Market ETF; 13% in an International Stock ETF; and 8% in a bond ETF, put the rest in cash and savings. I mean you’re going to need something on hand for that skydiving trip you’ve been planning.

For a balance investor a typical target portfolio is 49% portfolio in domestic stocks; 12% in international stocks; 18% in bonds, put the rest in cash and savings. To get into a portfolio like this you could simply purchase three ETFs, one per asset class just like before and just like that, you’re in the market.

For our conservative income investors a typical target portfolio breaks down like this. 31% in Domestic Stocks; 6% in International Stocks; 34% in bonds and 29% in cold hard cash and just like the other two you could get into this portfolio with just three buys. Now I am not telling you this is what you should do, I’m simply showing you a few ways you could allocate a portfolio based on the level of risk you’re comfortable with. You’ve got to use you mind, figure out what works for you. See, investing doesn’t need to be complicated.

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