Investing

Building wealth through markets: understanding investing principles, asset classes, and portfolio construction.

Why Learn Investing

• Compound growth is the most powerful wealth-building tool
• Inflation erodes cash savings
• Social Security won't be enough
• Financial independence requires investment
• Understanding protects you from bad advice

Contents

Core Principles

1. Time in Market Beats Timing the Market

You cannot consistently predict market movements. Data is overwhelming:

• Missing the best 10 days over 20 years cuts returns in half
• Professional fund managers underperform indexes
• Market timing requires being right twice (when to exit, when to enter)

Strategy: Invest consistently. Stay invested.

2. Diversification Is Free Insurance

Don't put all eggs in one basket:

• Across asset classes (stocks, bonds)
• Across geographies (US, international)
• Across sectors (tech, healthcare, consumer)
• Across company sizes (large, small, mid)

3. Costs Matter

Every dollar in fees is a dollar not compounding.

Use low-cost index funds.

4. Risk and Return Are Related

Higher expected returns require accepting higher risk:

• Stocks > Bonds (historically)
• Small companies > Large companies (historically)
• International/Emerging > US only (sometimes)

Your job: Take the right amount of risk for your timeline and goals.

5. Behavior Is Your Biggest Risk

Most investors underperform because they:

• Buy high, sell low
• Panic during downturns
• Chase past performance
• Trade too frequently
• Try to time the market

The best portfolio is one you'll actually stick with.

The Simple Investment Plan

Step 1: Emergency Fund First

3-6 months expenses in savings before investing.

Step 2: Capture Employer Match

401k up to full employer match = 100% immediate return.

Step 3: Max Tax-Advantaged Accounts

Step 4: Simple Portfolio

One-fund solution:

• Target date fund (e.g., Vanguard Target Retirement 2045)
• Automatically rebalances, adjusts risk with age
• Done.

Three-fund portfolio:

• US Total Stock Market (60-80%)
• International Stock Market (10-20%)
• US Total Bond Market (10-30%)

That's it. You don't need more.

Historical Returns (Approximate)

Real returns = Nominal - Inflation

Investment Vehicles

Index Funds/ETFs (Recommended)

What to Avoid

• High-fee actively managed funds
• Complex products you don't understand
• Individual stock picking (unless small portion)
• Market timing strategies
• Whole life insurance as "investment"
• Annuities (usually)
• Anything promising guaranteed high returns

Tax-Advantaged Priority

1. 401k up to match
2. Max HSA (if available)
3. Max 401k
4. Max Roth IRA (if eligible)
5. Taxable brokerage

Common Mistakes

Recommended Resources

Books

• The Simple Path to Wealth by JL Collins
• A Random Walk Down Wall Street by Burton Malkiel
• The Bogleheads' Guide to Investing
• The Psychology of Money by Morgan Housel

Online

• Bogleheads.org (forum)
• Portfolio Visualizer (backtesting)
• Vanguard, Fidelity, Schwab (low-cost brokers)