Investing Made Simple for Beginners and Everyone Else

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Some people will tell you you can gain complete exposure to stock markets worldwide by just buying a single global equity fund, one that invests in stocks everywhere. And that’s true. But these funds, and not you, decide how much of your money is invested outside the United States.

The Vanguard Global Equity Fund, for example, has 46 percent of its investments overseas, which strikes me as high. But it’s your call. Owning stock inside and outside the United States is what’s important. If you were, say, French, or Chinese, or Mexican, I’d suggest much the same thing. Own a diversified portfolio with stock from around the world, not just your home country.

The bond portion of your portfolio can be equally simple. Buy a total bond index fund. It will hold U.S. Treasuries and bonds of all durations — short, intermediate and long-term issues. And if you wanted to put 20 percent of your bond holdings in an international bond fund, it would be fine with me.

And that’s it.

Each year, you can shift 1 percent of your money over to bonds and leave everything else alone. That means as you get older, more of your money will be in bonds. That will be a good thing because it will hedge the risk of a sudden fall in stock prices as you approach a time when you will need the money.

Now, an alternative to shifting the money yourself would be buying a target date fund, a mutual fund intended to meet an investor’s needs at a specific future date — when they plan to retire, for example. The fund will automatically move you into more conservative investments over time.

If you like the idea, just make sure you are comfortable with what they hold. Every target date fund is a little bit different in the way it invests, its mix between stocks and bonds and what percentage of stocks it has in international holdings.

If you need help with complex financial issues — stock options, for example, if you are fortunate enough to be offered them — or simply to double-check your decisions, I would recommend a fee-only financial planner who charges by the hour and works as a fiduciary. Fee-only means they do not receive commissions on what they recommend, and fiduciary means they are obligated to act in your best interest.

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