Steps to take from saver to investor | VailDaily.com
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Steps to take from saver to investor

Richard Loth

There’s a lot of unfamiliar information to digest, and, unfortunately, those individuals with a relatively small amount of capital to invest will find it difficult to get much substantive help from investment professionals.Since most beginning investors fall into the less-experienced category, I strongly urge them to first “invest” in some basic self-education. I suggest going to the Vail Daily’s Website – http://www.vaildaily.com – and type in my name in the search box. There you’ll find archived six-month’s worth of weekly “Investing Wisely” articles that should be of help. Then, read just one book, Walter Updegrave’s “Investing for the Financially Challenged.” This book will help you understand my suggestion for a practical approach to putting your money to work.Simple and easy To get you started, get to know The Vanguard Group – http://www.vanguard.com or 1-877-662-7447. Vanguard is widely recognized as one of the top-rated investment companies, which are the sponsors of mutual funds, and is highly respected for the quality of its fund offerings. In view of the investment industry’s scandals, these are important considerations for investors.To keep things simple, let’s consider getting started with an easy-to-assemble Vanguard portfolio. I’m proposing that this investor start with $3,000 and aim for developing a diversified portfolio of eight mutual funds that will total, sooner or later, $50,000.You can accomplish this objective by staying “under one roof,” which means that you can work exclusively with Vanguard. That means one account statement; a wide selection of well-managed, low-cost, reliable performing funds; excellent customer service; and Internet access to one of the best fund information presentations in the business.Model portfolioMy Vanguard portfolio-fund recommendations, with one exception, are Morningstar Analyst Picks – the best of the best. This eight-fund portfolio carries an average investment risk with an above average return. The dollar-weighted annual average 10 year total return of the portfolio is 11.58 percent. Quantitatively, the portfolio’s asset allocation is 70 percent stock and 30 percent bond. However, in qualitative terms, the large-cap, value-oriented bias of the stock holdings tilts this portfolio more in the direction of a moderate risk posture than an aggressive one.The individual investments, five index and three managed mutual funds, provide for ample diversification. Broad market exposure, a range of company size (market-caps), diversity of style, and reliable, long-term performance characterize this selection of Vanguard funds. The minimal initial investment for each is a reasonable $3,000.Core and supporting portfolio funds The core funds, which total $29,000 or 58 percent of the portfolio, consist of the Total Stock Market VTMSX ($8,000), Wellesley Income VWINX ($12,000), and Wellington VWELX ($9,000). The VTMSX is an all-cap blend index stock fund that tracks the DJ Willshire 5000. Wellesley and Wellington are hybrid funds with a mix of stock/bond holdings of 40 percent/60 percent and 60 percent/40 percent, respectively. Their stock holdings are large cap and value oriented.The supporting funds, amounting to $21,000 or 42 percent of the total portfolio, are the Mid-Capitalization VIMSX ($6,000), Explorer VEXPX ($4,000), REIT Index VGSIX (($3,000), European Stock Index VEURX ($3,000), and Total Bond Market VBMFX ($5,000). The VIMSX is a mid-cap blend index stock fund, while the Explorer fund provides small-cap growth stock exposure. The Vanguard REIT and European Stock are both index funds that invest in the real estate and international sectors, respectively. The VBISX is an investment-grade, intermediate-term bond fund.Whether you have a lump sum or need to grow into this portfolio, this one-stop shopping with Vanguard provides a convenient and practical approach to begin building a retirement nest egg.The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing, an independent registered investment adviser. Loth can be reached at (970) 827-5591 or mentorinvesting@comcast.net.Vail Colorado


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