Making resolutions is the easy part. What's tough is actually following through on them.
For many people, resolving to get their finances in order is a top priority, especially now. With times as tough as they've been lately, a lot of people have had to make financial sacrifices to make ends meet, doing things that they would have preferred not to do. And if you've never had an opportunity to start saving for faraway goals like retirement, buying a home, or sending your kids to college -- well, it's tough to keep your resolve when it seems like everyone around you is losing their jobs or struggling to stay afloat.
So if you want to put a big black check mark next to at least one of your resolutions for 2010, I've got a simple three-step plan for you to get started with an easy-to-manage investing plan right now.
Step 1: Find some money to set aside.
For many, the most intimidating thing about investing is big size of the dollar figures that people casually throw around. People will casually talk about buying 100 shares of a $200 stock, while you're sitting there thinking how it takes you months or even a year to earn the $20,000 it'd take to buy those shares -- assuming that you didn't have anything else you needed to do with your earnings, like eat or put a roof over your head.
You don't hear much about small investors, because they aren't glamorous and they don't make a bunch of money for financial professionals. But these days, even $50 is enough to get you shares of certain mutual funds and ETFs. Most discount brokers have relatively low minimum investments, and some, such as ShareBuilder, come with no minimums at all.
Step 2: Pick some simple investments.
Again, if you've read about investing, you might think that you have to become an expert on stocks and the business world before you make your first purchase. With thousands of different stocks and funds available -- and more coming out every day -- choosing can seem like an impossible task.
But you can put together a reasonable portfolio with just two investments: one that gives you exposure to stocks, and another that holds bonds for current income and stability.
For the stock portion, an ETF like Vanguard Total World Stock (VT) gives you just about anything you'd want in a stock investment. In one place, you'll find stocks of all different types, including the following:
- Large value-oriented U.S. blue chips that pay healthy dividends, like ExxonMobil (NYSE:XOM) and AT&T (NYSE:T).
- Faster-growing domestic companies such as Apple (NASDAQ:AAPL).
- International heavyweights from around the world, including both Old World stalwarts such as BP (NYSE:BP) as well as emerging-market movers like Teva Pharmaceutical (NASDAQ:TEVA).
- Up-and-coming small companies from both home and abroad, such as Autoliv (NYSE:ALV) and Sirius XM Radio (NASDAQ:SIRI).
Similarly, an all-purpose bond index fund like iShares Barclays Aggregate Bond (AGG) will give you fixed-income exposure both to high-quality Treasury and agency bonds as well as corporate bonds from a variety of issuers.
Combine that with the cash you have on hand, and you've got the tools you need to set up an easy asset allocation strategy that's about as diversified as you could possibly get. If you're young and have a lot of time before you'll need that money, put more of it in stocks. If you're saving for a short-term goal, focus more on bonds and cash. There are more specific details here, but that should give you the general idea.
Step 3: Keep it up and watch it grow.
If you keep adding money month after month, you'll see how your account balances grow over time. Before you know it, you'll have the portfolio you always dreamed of -- and you'll be well on your way toward whatever financial goals you set for yourself.
So don't let the prospect of investing for the first time intimidate you into paralysis. Instead, get ready to mark off your first resolution of 2010 with confidence, knowing that it's easy to get started with your first investment.
