Beginning investors, start with Vanguard: Part I
After several discussions lately with individuals wanting to know how to get started in investing, I thought it would be worthwhile to share with readers my standard reply. First, let’s put the question and answer in context. Generally, the people involved have little, or no, knowledge of the investing process. Also, we are talking about a relatively modest amount of money – between $1,000 and $5,000 – as an initial investment, followed by subsequent additional amounts measured in the hundreds rather than in the thousands of dollars.The easy answer would be to go see, what I call, an “investment advice-giver,” i.e., a broker, financial planner, or an investment adviser. However, before one takes a step in that direction, I would recommend making an investment of some time and energy in learning a little bit about investing before you talk to an investment professional or decide to go it alone.Here’s why. Investing advice will make more sense to a beginning investor who at least has some knowledge of the basics. Also, investing for those just getting started should be restricted to mutual funds; stocks require a relatively high level of financial expertise and experience to make, as opposed to losing, money.Fund investing is not rocket science. It is relatively easy to understand and execute, even on your own, at the beginner’s level. One of the most effective ways to accomplish this is to put yourself in the hands of the Vanguard Group.Vanguard is one of the most highly respected fund companies in the business. Its reputation for client service and education is well established. I have absolute faith in telling people who contact me and ask the “how-do-I-get-started” question with this simple response: Pick up the phone, call Vanguard (877-662-7447), tell them want you want to do, and follow their advice. You can trust them to do what’s right for you.By the way, the cost of taking this approach is zero. The phone call is toll free, Vanguard’s funds are no-load (no sales charge), and their advice at this level of investing will cost you nothing. That’s Plan A for getting started in investing. Plan B, which is my real preference, requires slightly more initiative on the beginner’s part, but is much more rewarding in the long run. Go to Vanguard’s Web site http://www.vanguard.com and at the home page click on the “Go to site” prompt under the Personal Investor caption.On that screen, you’ll see a “What we offer” section with five prompts. Two of these, “Vanguard mutual funds and ETFs” and “Investor education and planning tools,” are what I want you to focus on. Today, we’re going to get you started on the latter prompt. In next week’s column, I’ll lead you through, step by step, one of the best presentations of mutual fund data that’s available. Vanguard’s twelve-point fund profile is easy to understand and is an exceptional fund selection and monitoring tool.Back to the “Education” prompt. Clicking on this item takes you to the “Planning & Education” page. Here you should select the “Investor Education” tool, which gets you to our destination – “Plain Talk on investing.” In the left-hand column, there are six basic investment topics that every beginning investor should commit to memory. Whetther you aspire to be a do-it-yourselfer investor or lean toward using an investment professional, learning these basics of investing, particularly as they apply to mutual funds, is essential reading.A little time and effort using this guidance provided by Vanguard is definitely a worthwhile first step for beginning investors. If you do your homework with this educational material, next week’s column on using Vanguard’s fund data to make a mutual fund selection will be particularly meaningful. The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing, an independent registered investment adviser. He can be reached by emailing firstname.lastname@example.org or calling (970) 328-5591.Vail, Colorado
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