How Do I Start Personal Investing?

Determine An Inventory Of Your Situation 

Think of it like a balance sheet in accounting if you are familiar with the set up.  List all your assets at fair market value. Then list all your debts, amounts AND interest rates. Finally list your other factors: age, health, family requirements, expected inheritances, etc. You have to know where you are before you can determine a goal of where you want to be. I want to see your expected cash flows in and out over the next five plus years. Ten would be better. Do NOT use money that you need immediately for personal investing.

Determine The Goal 

What do you wish to achieve and over how many years. Be realistic.  Investments have tremendous fluctuations. The cycles can last many years.  The last five or six years have been very good. There is no promise that those results will repeat themselves over the next five years. In the last fifteen years, there have been two major crashes. If your agenda is to buy a house in three years or pay for an education next year, the market contains too much risk. If your goal is to provide for your retirement in ten years, the market is a great place. Make Sure personal investing fits your goals.

Determine How Much Risk Is Acceptable 

Ask yourself how much decline can you handle before you freak out. 10% decline – no problem? 20% decline – stressed? 30%? This question is a sensitivity analysis to market declines. Personal investing entails a lot of risk; make sure you can tolerate that risk.

Determine How Best To Achieve Your Goal 

Start educating yourself as to how the market works. Vanguard’s founder John Bogle wrote several good books on portfolios and personal investing. I am fond of Vanguard funds, various ETF’s, and DFA. In essence, I am an index investor.  I do not believe that it is possible to time the market. I think day trading is junk and virtually all academic research agrees.

Interest Rate of Your Debt

Above I asked for the interest rates of your debt. I am not embarrassed using money to pay down a debt. What is the difference between achieving a long term investment return of 5% and getting rid of a debt that costs you 5%?  Over long periods of time, the market returns 8% to 10%, depending on how much risk you are willing to accept. If you have debt that is more expensive than that, such as a credit card at 18%, you are better off paying off the debt than personal investing.

Fee Structure

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. If you would like to submit a post to my blog, please contact me.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

Did my explanation make sense? Do you agree or disagree with what I said?

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