It only took 3 years, but I am finally rolling over my 401k. If you are an investment savvy person, please leave now, so I don’t embarrass myself with kindergartener’s guide to investing. As mentioned, I’m on some crazy personal finance book binge, because taking on a mortgage payment feels a bit scary without understanding how to look at my finance. Without a drop of knowledge in investing, I let my 401k plan do its thing and let it grow on its own.
Over the last couple months, I’ve read over ten personal finance books. Don’t be too impressed, because a lot of them focused heavily on getting out of debt or teaching your kids to be financial guru. After a few books, I figured out how to check if my 401k investments were performing up to par, which is to compare it to the market in general, against S&P 500. I used Mint.com to help me do a compare, there’s a little button that charts it for you. My investments in my 401k “Aggressive” and “Growth” plan was chumping along. They’ve been going up with the recent market up, so I thought for a long time they were doing fine, but when I got a good picture of what they “could” be doing, I have to drop them like a half-eaten apple with a worm poking out. The plan was charging up the caboose for management fee too, it’s all in the paper stuff that I never read.
In the end, I found two books that I really love and I will probably dog ear them to death:
1) The Bogleheads’ Guide to Investing
Don’t let the silly looking cover fool you, I love this book. It’s the first book that made me feel less overwhelmed by all the investment options. Stocks scare me. I don’t understand them, and I thought that investing means learning how to trade stocks. No, no, no. Investing means buying and holding, preferably holding the whole market. I had no idea you can buy pieces of the market as a whole. The market as a whole has an upward trend, and if that ever collapse, you will be worrying about a lot more than your 401k plan. The author does give you the option to day-trade if you really want to, but he tells you to open a specific “gambling” account. If you lose that money, don’t add to it, just walk away from the table with grace.
2) The Four Pillars of Investing: Lessons for Building a Winning Portfolio
If you can get this book used for cheap, do so, apparently the new “updated” book is pissing people off because there’s just a few pages added to the end. The book itself is great, the original material stands to this day. This book will guide how I plan to invest my rolled over 401k. I plan to start with his lazy diversifying portfolio, and then switch things up as I learn more about investing. I now have an account with Vanguard waiting for the 401k to roll over. The plan is simply to go 25% Vanguard 500 Index Fund, 25% Vanguard Total International Fund, 25% Vanguard Small-Cap Value Fund and 25% Vanguard REIT Index Fund. I will likely re-balance soon after, but this will serve as a starting point.
Whew! I feel all adult-like now (only took me 35 years), talking about my retirement plans, I’m going to have some gummi bear for breakfast now.