One of my goals at the Dough Roller is to inform and encourage those who have never invested, are new to investing or have invested without giving it much thought. Recently I wrote about helping a close relative to start investing in her company’s 401(k). In discussing the situation with her, I realized that one thing holding her back was a lack of basic information about investing.
And from this was born the New Investor’s Toolkit. The idea is to bring together in one place a number of free and low cost resources that new (and even not so new) investors can turn to to gain a better understanding of mutual fund investing. The Toolkit is broken into four sections: articles, books, websites, and tools. I hope these materials prove helpful to you.
Table of Contents:
There are a number of great articles on a variety of investing topics. Here are a few I think are particularly useful for a new investor:
- How to Invest for the First Time: We created this in depth guide that covers everything a new investor needs to get started. Whether you are investing in your company’s 401(k), your own IRA, or a taxable account, this guide is the place to start.
- 31-Day Money Challenge: This is a series I put together on personal finance and investing. These podcasts cover all aspects of money. The section on investing begins with Podcast 23.
- The Three Principles of Investing: This very short article is a basic introduction into the rationale behind asset allocation. In addition, I’ve written a more comprehensive series of articles on asset allocation.
- Vanguard has a free series of articles that provide a great framework for investing. The starting point is Vanguard’s Principles for Investing Success. This PDF is a great place for new investors to start.
- Money Ratios: This article-turned-book uses simple ratios to help you determine if you are on track to retire.
As a starting point, these three books will give you a great introduction to mutual fund investing:
The Bogleheads’ Guide to Investing: I know what you’re thinking–what kind of name is Boglehead? Here’s the story. Several years ago a group of investors who favor Vanguard’s index funds began a discussion forum on Morningstar. They named their group the Bogleheads after Vanguard founder Jack Bogle. Today, the group has a very active forum on Morningstar as well as on their own site called Diehards.
The group’s founders, Taylor Larimore, Mel Lindauer, and Michael LeBoeuf, came together to write the book. By the way, John Bogle knows of the group and has even attended some of their annual meetings. The book is an excellent place to begin learning about investing and mutual funds. It covers the benefits of long-term investing, stocks, bonds, asset allocation, taxes, and a lot more. And the book’s style is easy to understand. It’s the kind of book that makes you feel smart when you’re done reading it.
The Little Book of Common Sense Investing: Speaking of John Bogle, his book on common sense investing is an excellent introduction to a number of investing concepts. Perhaps the most important aspect of this book is its discussion of mutual fund fees.
As I’ve written before, the expense ratio of a mutual fund is not a complete picture of the cost of a mutual fund. Bogle discusses the cost issue, as well as taxes and the benefits of index funds. One aspect of the book I particularly enjoyed was his balanced approach to index funds. While he certainly believes they should form the core of a portfolio (and I agree), he recognizes that there may be a place for actively managed funds in a diversified investment portfolio. This is a must read.
All About Asset Allocation: This book is a more advanced discussion of asset allocation. It is well written and very easy to follow, and its detailed discussion of asset allocation and building a portfolio are important for DIY investors. One aspect of the book I particularly find useful is its sample portfolios. It includes both “simple” and “advanced” portfolios for each stage of life (20-39, 40-59, early retirement and so on).
The simple portfolio has about four asset classes and mutual funds, while the more advanced portfolios have several more. In addition, he lists specific mutual funds for each asset class. This is an excellent primer on asset allocation.
- Investopedia: This is a great general resource on investing. It also has a series of basic investing tutorials.
- MoneyChimp: This site provides good articles on index funds, reading financial reports, asset allocation, and so on.
- Morningstar: This is the mothership of all things mutual funds. Anything you want to know about a mutual fund can be found here, as well as articles on investing and a number of good discussion forums. I regularly write about how to use Morningstar in a series I cleverly call, Making the Most of Morningstar.
- ETFConnect: If you’re interested in ETFs, in addition to Morningstar, you should check out this site. It includes an Education Center (home page, top right tab) that provides some useful articles on ETFs.
The main tool I use to manage my investments is Personal Capital’s free financial dashboard. Personal Capital is an investment advisor that manages investments. They offer a free financial dashboard regardless of whether you become a client. And it’s phenomenal.
This tool offers several key features:
- Investment Tracking: Link your 401(k), IRA, taxable, and other investment accounts in one place. It tracks your asset allocation, makes suggestions, and even analyzes your investment fees.
- 401(k) Fee Analyzer: Connect your 401(k) accounts, and Personal Capital will show you just how much the fees in your 401k account will cost you over a lifetime of investing. You’d better sit down before seeing the results.
- Retirement Planner: Find out if you are on track to retire. The tool is customizable, too. You can play with different assumptions about inflation or spending, for example, to see how these changes would affect your retirement.
- Cash Flow: It’s also a great budgeting tool. Connect your bank accounts and credit cards and manage your budget.
One final note: Investing is a lifelong adventure, and the learning never stops. At first, it may seem overwhelming. But if you keep working at it, reading, and learning, your future self will thank you. And the resources list above is a great place to start.