For the first time, I got a PM asking for advice on investing. While I responded to the very nice person who asked for suggestions, I also mentioned I am not an investment professional and whatever I learnt is from school of hard knocks. Also, everyone shoukd do their own homework.
I also want to emphasize opinions given by me are mine alone, and do not reflect the views of this site and it’s excellent management.
Re: Serious thread - do your own homework
For anyone, it starts with asset allocation and periodic rebalancing.
First you set aside one year expense cash for emergency fund. ONLY AFTER that you think about stock market and investing.
Re: Serious thread - do your own homework
Depending on ur age and risk tolerance ur asset allocation will vary.
If I was 30 yrs old and had 30 yrs of employment ahead of me, here is what I wouod do AFTER putting aside one year of expense.
Re: Serious thread - do your own homework
80 ct stocks
10 pct bond
10 pct cash
Re: Serious thread - do your own homework
In stock section here is how I would distribute my assets
75 pct US
25 pct international
Re: Serious thread - do your own homework
In US stocks - I will simpky but the Total stock mkt index fund
In International stock - I will simply buy the International stock index fund
Both from Vanguard for me (You can choose Schwab fidelity etc)
Re: Serious thread - do your own homework
Ditto bonds
75 pct US total mkt bond index fund
25 pct International bond index fund
Re: Serious thread - do your own homework
For cash, simply buy laddeed CDs.
Re: Serious thread - do your own homework
Rebalance twice a year.
Khalas.
Re: Serious thread - do your own homework
Why are you involving someone’s Khala in here? Are phuppos invited too? 
Re: Serious thread - do your own homework
Investing DOES NOT HAVE to be more complicated than this.
The only thing that changes from above recommendations is
The change in asset allocation percentages based on your age, goals, risk tolerance an financial situation.
Remember, NEVER keep money that you need in less than 5 years in the stock market.
NEVER.
I welcome the professionals who know much more than I do to chime in with their values opinion.
Thanks. And God Bless.
Re: Serious thread - do your own homework
Of course!
Aapas and aapis also included.
Re: Serious thread - do your own homework
For those who are just starting and have some cash on the sidelines, would it be prudent to enter the market NOW?
First let us assume they have set aside the one year emergency cash. If you read the "Whither the Markets thread", the stock market was overvalued when thread started 1.5 yrs ago. It is up 5 pct now. Or 3 pct per year. So less overvalued than it was. It was flat last week at the bottom.
Some perspective, it is up 27 pct from 2007 peak of 1575. That is 27 pct in 8 years. Or 3 pct per year.
So again, less overvalued than in 2007 peak.
Re: Serious thread - do your own homework
Market in 2000 peak was at 1500. So up 75 points in 7.5 yrs. Or 5 pct! Or 0.55 pct per year!
Which means even 2000 peak way way less overvalued than 2000.
So from most overvalued in 2000 to still overvalued in 2007 to about 25 pct overvalued now.
Re: Serious thread - do your own homework
So if I were to enter the market now, I would put in 6 pct of cash in each month in stock and bond market. That way, over the next 18 months, I would have reached my asset allocation goal. Without getting ALL IN at these prices.
This is an example of what I would do. Others would have a different approach.
Re: Serious thread - do your own homework
Since I have spoken about individual stocks - read the undervalued stocks thread - readers can ask why I am I recommending ONLY mutual funds when I myself own individual stocks. Response shortly.
Re: Serious thread - do your own homework
A major portion of us stock funds I have is in S&P500 index funds. This comprises 500 of largest us stocks. And this is market cap weighted.
So the greater the market cap of a stock, more it's representation in the fund. In other words, the fund buys more of a stock as its price increases. Which by definition makes it tilt away from undervalued stocks.
Re: Serious thread - do your own homework
In order to counter this tilt towards more expensive stocks, I simply built a basket fo stocks that I considered UNDERVALUED AND UNDERREPRESENTED in the index fund. The goal is NOT to beat the market. But to provide some balance. Clearly, in a bull market, my basket of stocks will mode probably underperform. (Though they did quite well as you can verify by visiting the Undervalued stocks thread).
But in a bear market, they are expected to go down less than the market. Since they are undervalued compared to the market.
Re: Serious thread - do your own homework
About 6 years ago, Pharmaceuticals stocks with high yield were underrepresented in the market. So I loaded up on them. And have pared them down as they rose and they were no longer underrepresented.
Now oil stocks are undervalued. So have started to dip my foot in oil. Have about 8 pct loss on average. But rooting for them to go down some more.
Just fyi, have sold stocks over last year and have 80 pct cash in the individual stock account. If the mkt goes down, will use the cash. If it doesn't that is ok. The stock funds will do well.
Re: Serious thread - do your own homework
Now that I have explained why I hold a basket of individual stocks, if I were to start investing, I would not start with individual stocks. I wouod even argue that individual stocks are not even jecessary.
Now why did I mention on index funds? Their management fees are low. As low as 0.05 pct. And their turnover is low. So low trading costs.
They also beat 80 pct of all actively managed funds.