Getting Started

Zion National Park

How do you begin constructing a portfolio if you are an investor neophyte?  What are the “baby” steps to investing and how does one get started?  Here is an outline I would use if I were a new investor.  Before moving into the beginning steps, new investors need to fully understand the power of The Golden Rule of Investing.

• Start a savings account with a bank or savings and loan firm.  Look for one that is low cost or free.  If there is no minimum with the broker, start by first investing in the money market at the broker firm.
• Once you have saved the minimum needed to open an account with a firm such as Schwab or Vanguard, go on-line and open the account.
• I recommend Schwab as they recently purchased TDAmeritrade and provide Robo Advisor services.  More on this in a bit.  The Schrodinger portfolio is a Schwab managed robo portfolio.  Robo simply means the portfolio is managed using a computer model.  Schwab does not charge for this service.
• If you set up an Intelligent Portfolio with Schwab you will need to fill out a questionnaire.  This is to determine what risk you are willing to take as an investor.
• If you are given any latitude, determine what percentage you want to invest in stocks and what percentage to allocate to bonds.  The questionnaire will help determine this ratio.  Once money is deposited with the Robo Advisor and the stock/bond ratio is established, as an investor you do nothing more.  The portfolio is managed by the computer model.

Here is the current makeup of the Schrodinger portfolio.  This is an example of a computer managed portfolio.

One very simple model it to buy shares in VTI (entire U.S. stock market) and each month buy more shares with regularly scheduled savings.

Another model to follow is known as the Dual Momentum (DM) model.  Search this site for that model.  The three portfolios that follow the DM model are:  Aristotle, Euclid, and Galileo.

More sophisticated investors use the Kipling spreadsheet to manage their portfolio(s).  Personally, I favor using different models while reviewing portfolios at different periods so as to minimize the luck-of-review day.

The three simple models are:  1) Use a Robo Advisor.  2) Invest strictly in VTI.  3) Learn how to implement the Dual Momentum model.

Lowell