I am sure you have all heard the saying, "Don't put all your eggs in one basket." This can refer to many things but when I think of it, I think of our portfolio.
When we are investing, we make sure that we diversify. We don't want all of our investments in one stock or one stock fund or one bond or bond fund. We don't want our entire portfolio to just be stocks or bonds. We want real estate, cash, CD's, stocks and bonds.
So once you are debt free and have your emergency money funded, then you can save for investing with one exception. You should always make sure that you fund your 401K's and your IRA's. These are tax free until you start withdrawing from them in retirement. In retirement, you most likely will have a lower tax rate than while you are working. If you work for a company who matches your 401K investing with a match of a certain percentage( for example, 6%), you are throwing money away if you don't take advantage of that match. That is free money.
After you have those things done, then you can start investing. You can save in a savings account or short term CD until you have enough money to meet the minimum requirement to invest. You can continue to save and keep your money in the bank. You can continue to buy CD's. You can invest in real estate. You can invest in stocks or bonds. There are so many things that you can invest your money in. What you do is up to you. It should be what you are happy and comfortable with.
If you are risk adverse, then I would suggest you keep your money in the bank. However, expect that you will earn very little money on it because interest rates are low. But that is perfectly fine if you are afraid of losing your money in the stock market.
We like to have "eggs" but not in the "same basket". So we invest in total stock index funds, bond funds, savings accounts in credit unions because they tend to pay better interest than banks. We also own real estate (many acres) in another state that we lease to a company. We have not purchased any CD's recently because the interest rates are so low. We will revisit those when interest rates rise.
We usually keep about 30% of our portfolio in cash accounts. However the other day, we noticed that our cash account had way more than 30% of our portfolio in it. So it was time to re-balance our portfolio and move some money elsewhere. So yesterday and the night before(remember I told you I was really busy), Hubby and I spent hours researching some new stock index funds to decide what to buy. We like to always be invested in a number of different funds, so that if one goes down our entire portfolio doesn't take a hit. We also love funds that pay dividends. We have our choice of reinvesting the dividends or having them put in our money market where we can access them as needed.
Anyhow researching takes a lot of work and is tedious. My head was spinning when we were done. But we want to make sure that we have looked at everything about that fund before we buy in. So after careful research, we have made our decision and purchased into three different funds today.
I have seen markets go up and go down many times in the 49 years we have been married. But history has shown that you might make money if you are in it for the long term.
Our portfolio really equates to our liquid net worth. We don't count our home in our net worth because we need a place to live so we won't be selling it any time soon.
We do not give investing advice because we don't know any more about it than anyone else. We have no training in finance or investing. We had to learn through trial and error. You have to make your own decisions by doing your own research and learn the same way. So our opinions in this post are just the way we do it and not meant to be advice. We never took investment advice from anyone especially high priced brokers. We have always felt that those brokers seem to only look out for their own commissions. We have always researched and done our own investing. That way when we made mistakes there was no one to blame but ourselves.
That said, I will give you some links to some bloggers I know who hang their investing out there for you to see. I don't agree or disagree with any of them. You might or might not be able to learn something from them. If nothing else, their blogs are interesting reading. So here you go for your reading enjoyment: