How to Invest in Mutual Funds - The Couch Potato System
Research has shown that, over the long run, asset allocation is more important than which individual stocks you own. This article will show you the easiest way to build a diversified investment portfolio.
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Things You'll Need
- A source of income.
- The desire to build wealth.
- Enough discipline to get started.
Instructions
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Most of the big fund families have single fund where the allocation of stocks and bonds is based on your expected retirement date. Since I have my investments with Vanguard I'll use them as an example.
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Vanguard has a series of Target Retirement Funds.
I'm 55 and expecting to retire in 2021, twelve years from now (2009). The fund I've invested in is called "Vanguard Target Retirement 2020 Fund".
If you are between 25 and 30, and plan to retire in about 40 years (2049), you would buy the "Vanguard Target Retirement 2050 Fund".
Visit Vanguard' s website or call their 800 number to set up an account.
By opening this type of account you've already put yourself ahead of lots of "smart" investors.
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If getting started is the biggest obstacle for most folks, keeping the ball rolling comes in a close second.
Now that you've established an account you need to add to your investment on a consistent basis.
Make these contributions automatic if at all possible. You can set it up so Vanguard withdraws a certain amount from your checking or savings account each month.
It takes a bit of time to get this set up, but you only have to do it once. Then you're set.
Automatic monthly contributions to a well balanced account will almost guarantee you will do better than 99% of investors!!
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Let your money grow.
Don't make any withdrawals.Now that the market is way down, this is the best time to start investing!
You will be "buying Low" so that you can "sell high" later.
Those who are selling now are "locking in" their losses.
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Tips & Warnings
Read my article "How to make one millions dollars investing in mutual funds" to see how you can build a million dollar portfolio.
Other big fund families are: Fidelity, Franklin, T Rowe Price.
This is an easy, low maintenance way to build wealth, not investment advice.
