Guidelines for the DIY Investor

For the record, this article is not in my best interest. It would be much smarter to say that investing is complicated and best left to professionals, and that there is no way a non-professional can compete with, let alone beat, the risk-adjusted returns of a professional advisor. While this makes me want to go down the rabbit hole and rant about “financial salesmen” versus true advisors and nerd out about all the intricacies of portfolio construction, the point of this article is getting out of the starting gate, and that merely requires initiative.

This article assumes you are young(ish) and already have a 401k or similar retirement account, and that you are looking for other ways to save through a separate brokerage account that you set up (through Fidelity, Schwab, Interactive Brokers, etc). It also assumes you don’t have any extraordinary debt management needs that would take priority over saving and investing. If any of these words are unfamiliar to you, then you are a prime candidate for an advisor. Do not fucking wing this, but do your homework on who you select!

The ideal thing to do is to automate your savings. Whatever you know you can reliably save each month, put it toward your savings or brokerage account, which you can then invest as appropriate.

One of the most common questions I get is “what should I invest in?”. People have no idea how broad this question is: what is your time horizon? What is your risk tolerance? What is your level of expertise? Do you have an active or passive philosophy? Let’s assume you don’t care about any of these things, and just want the most generic advice possible. That’s boring, but fine. Here are 3 steps, which you should rinse and repeat-

  1. Invest the first $10k in a diversified equity fund. This can be a mutual fund or ETF, it can be active or passive, it doesn’t matter. The ticker SPY represents the most common index ETF.
  2. Invest the final $10k in a diversified bond fund. Ticker AGG is a common bond index ETF.
  3. Rinse, repeat, rebalance as necessary.

I know how self-serving it sounds, but despite all the claims by pop-finance superstars (ahem, you know who you are), not all the rules of investing and financial planning fit on a single index card. This is a guide to get you started, which can’t steer you too wrong in the short term, but eventually I hope you seek out [true] financial help, not for my sake, but for yours. I have said it before, but there is nothing worse than getting a retirement-age client that has made a lifetime of mistakes that I have to un-fuck. This is why I will always prefer to take on younger clients that I can guide through the process, because it is more rewarding to help clients create their future rather than fix their past.


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