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How to Decide What to Invest in (DIY Investing Vs Financial Advisor)

How to Decide What to Invest in

Do you know what you’re investing in?  Or was it something your parents picked out years ago and you have no idea!? How do you decide what to invest in? Is DIY investing possible? Or do you need to hire a financial advisor?

This is a great question and common dilemma (you’d think they’d teach this stuff in school!).

Someone wrote in to find out:

Carly, I’m transferring not a very large amount of money from a temporary 401k to my Fidelity account. I’ve had the Fidelity account set up for years and my dad originally chose all the funds when he was with his accounting firm. He’s retired now so he doesn’t have anyone who can tell me how to divvy up the amount I’m transferring. Do you know if I should just divide all the money evenly and deposit them across all the different funds? Or is there a way I can figure this out on my own? Is it best if I consult with someone?


The short answer to this dilemma is- yes!  You can decide what to invest in on your own.

How to decide what to invest in

In this post find out :

  • How deciding what to invest in on your own (vs a financial advisor) can save you $590,000
  • How to overcome analysis paralysis when deciding what to invest in on your own
  • The bottom-line of what you need to know about investing (before deciding what to invest in)
  • An amazing all-in-one fund (it costs less and earns you more than the average mutual fund)

How DIY investing (vs a financial advisor) can save you $590,000 over your lifetime

Financial advisors are paid fee-based or fee-only. For example, fee-based advisors are paid a percentage of what you invest in even if the investment performs poorly. There’s a conflict of interest. Are advisors recommending investments in your best interest or because they’re getting paid a higher commission? 

More importantly, NerdWallet estimated a 1% fee can cost $590,000 in lost earnings over 40 years of investing.

To avoid a conflict of interest there are fee-only financial advisors. Instead of paying a percentage of your investment, you pay a flat fee for a financial plan from $2,000 – $7,500 a year.

Tori, a 20-something said, “I previously looked into working with a financial advisor to help guide me and was quoted at about $6,000 per year, which I definitely didn’t have to spare given I was living mostly paycheck to paycheck. Thankfully, I found Best Money Class Ever which taught me how to responsibly navigate my finances on my own and gave me a plan to manage my money!”

Overcome analysis paralysis with investing

Investing can be intimidating and like a foreign language. Don’t stay in overwhelm mode! Keep it simple. Overcome analysis paralysis by knowing the importance of simply starting to invest. The act of investing now (versus later) is huge!

When deciding what to invest in, time is money!

The time value of money is a finance concept. It means a dollar saved now is worth more later because of interest earned over time. Your money when saved, earns money, and compounds. Compound interest is quite fascinating and like a magical unicorn.

The bottom-line of what you need to know about investing (before deciding what to invest in)

You can spend a lifetime studying and analyzing how the stock market works (but who has time for that?!). You need to start. When deciding what to invest in, you only need to have a basic understanding of two investing strategies: asset allocation and diversification.

Asset allocation balances risk and reward with three main types of assets: stocks (also known as equities), bonds, and cash or cash equivalents. In Riki’s questions she worded this principle as, “how to divvy up” the money.

In a nutshell, stocks are when you own shares of a publicly traded company. Stocks are higher risk, but historically provide highest return, earning on average 10%. A bond is when the investor loans money to a company or the government for a set time. Bonds are less risky, but they have lower returns.

Cash has exceptionally low risk and return (your money doesn’t even keep up with inflation). Cash is not for retirement investing; instead, cash is an asset perfect for your emergency fund to cover unexpected expenses. Here’s how to find out how much exactly you need in your emergency fund.

Next, diversification is a strategy to reduce risk with a wide variety of investments. Or in other words, don’t put all your eggs in one basket. Ditch the hype to pick individual stocks likeBitcoin, Telsa, or  Game Stop!

When deciding what to invest in, select a Target Date Index Fund

Target Date Index Funds are amazing! They’re an all-in-one fund centered around asset allocation and diversification. Instead of hand-picking different stocks or multiple mutual funds, you simply pick the target date you expect to retire. For example, if you want to retire in around 25 years, you’d select a Target Retirement 2045 Fund.

With Target Date Index Funds, you don’t need to divvy anything up yourself! It’s one fund you select based on when you’ll retire.

Target Date Funds are centered around your time horizon, or length of time you’ll hold on to your investment. The further you are away from retirement (when you first start investing) the fund is allocated mostly in stocks, giving your investment room to compound and grow.

Then as you age and approach retirement, your fund will have less exposure to stocks and more in bonds, with less risk.

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What exactly are you investing in within a Target Date Fund?

Not all Target Date Funds are equal; find one consisting of index funds. Index funds simply follow the market at large (they are indexed or tied to the market). This is a passive investing strategy. Historically index funds earn more in interest versus actively managed mutual funds with fees of 1-3%.

With index funds you don’t pay a high fee to a fund manager or financial advisor to hand pick thousands of stocks or bonds.

Since index funds follow the market, the fees are as low as .15%. This can save thousands of dollars over your lifetime and those savings can then compound to have a real positive impact on your nest egg.

Index funds earn more and cost less. Talk about a win-win!

For example, here’s what’s inside the Vanguard Target 2045 Retirement Fund:

  • 54% Total Stock Market Index (follows 3,613 U.S. companies)
  • 36% Total International Stock Market Index (follows 6,153 international companies) 
  • 10% Total Bond Market index (follows 7,741 bonds)  

In summary, you can decide what to invest in on your own!

Overcome analysis paralysis; time is money. Target Date Index Funds are all-in-one funds (you pick the target date you expect to retire). They’re diversified and adjust the asset allocation (stocks vs bonds) as you age. Index funds cost less (.15% vs 1-3%).

Want to learn more about investing? Or need help in finding money to invest? Maybe your debt is getting in the way of investing?! If so, Best Money Class Ever, my signature 4-week personal finance class starts soon. Get the details and enroll here!

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