What To Invest In As A Beginner | the lazy 3 fund portfolio

Auto-captioned from the film, lightly cleaned. Elena's words, not edited prose.

hi hello how's it going it's elena welcome back to my channel and today i'm bringing you guys another little finance video if you saw my previous finance video talking about the beginner's guide to investing you might be wondering now like okay now that i know more about investing i know the types of things i might be interested investing in like what the hell do i like actually invested and that's what i'm going to talk about today there's this thing known as like the refund portfolio also anything like the lazy fun portfolio which i'm like that's for me and possibly for you as well that's beginner friendly low-cost diverse all the things we're looking for so you haven't seen my other video on how to invest for beginners i remember checking that out i love talking about financial education on this channel i know it can be intimidating at first to think about investing like how do i actually do it what do i invest in it can feel embarrassing to ask questions of things that you feel you should know the answer to but in reality we're not taught nearly enough in school so hopefully i can provide a little information for you can be a misconception that you need like a fancy financial manager to basically manage your money but in reality there's so many good and easy ways to invest as a beginner that's super hands-off historically has really incredible returns and honestly anyone can do it so let's talk about the three phone portfolio i'm gonna break it down throughout this video we're going to talk about what those different funds could look like we're going to talk about different allocation percentages and talk about tips and just good things to know in general as well as some of the history of it so it's basically it's super simple it's comprised of three asset classes and like i said they're usually low cost it's great diversification usually composed of index funds or etfs which are very similar i'll dive into that in a second keep in mind i am not a financial advisor i say that in every make sure you're doing your own research and making decisions for yourself this is just a very well-known portfolio approach to investing like i said beginner friendly simple and has good returns so let's dive into what the three fun portfolio is the three fun portfolio like i said is composed of three aspect classes so the definition of an asset class is basically like a financial instrument which have similar financial characteristics and behaves similarly in the marketplace so the three asset classes where talking about are u.s stocks international stocks and bonds these assets are usually composed of low cost index funds or etfs which are super similar if you don't remember what an index fund is it's basically a big old basket of stocks so instead of just buying one individual stock say you want to put all your money into tesla stocks and all of a sudden tesla is not doing so great and that stock price goes down you're gonna lose all your money so the beauty of an index fund is it basically diversifies that ten thousand a thousand five hundred dollars you're investing across many different stocks there's different index funds so there's something like the s p 500 that tracks the index so it's basically a weighted index of the top 500 u.s publicly traded companies so these index funds are clearly very diverse and by breaking down that portfolio to those three asset classes it's making sure you're hitting pretty much everything across the board so when it comes to index funds and etfs i'll primarily be talking about index funds but i'll include the tickers for the etfs or if you're interested investing in those they're honestly very similar they're approached a little bit differently when it comes to trading times like throughout the day and etfs usually have lower minimum investment requirements so you usually have to pay like a certain minimum to invest in a certain index fund before we dive in a little bit deeper i have to give credit where credit is due this is derived from the bogle heads which i'm like that name just cracks me up like i've known about this refund portfolio for a while it's a very popular common approach to creating investment portfolio but i didn't know where it stemmed from and so the bogel heads are named after john c bogle who's the founder of vanguard he wrote that very popular book the little book of common sense investing which i highly recommend if you have not read that it's a great beginner friendly book so the bubble heads basically named themselves after john bogle and they're just basically like super fans like enthusiasts and love the work that he's done and basically are really passionate about investing they have like these forums where they answer questions and they chat they hold deal so it's often recommended by the vogelheads for the majesty of simplicity as her friend john would say so there's a little historical background for you i think he's quoted saying something along the lines like don't just buy the needle by the whole haystack and that's the beauty of the index fun round of applause for our late friend john and the work that he's done before we talk about how to build one let's talk about some reasons of why this is beneficial could be good for you so what i personally think about investing i like to think about what gives me the best opportunity for the least amount of risk i am younger i'm 24 i can afford to have more risky investments than someone that's like close to retirement like in their 50s i'm trying to kind of figure out what is a good amount of risk for me personally like i said this three front strategy has great diversification instead of having to pick out individual stocks like oh i wish i got on tesla earlier like oh no i'm going to like invest in like facebook or bumble and just like cross your fingers i hope the stocks go up and you make money and you don't lose all your money this is basically allowing you to invest in thousands of stocks all at once so you're really truly diversifying across the platform and with this strategy you're only focusing on three funds so it takes away that difficulty for you you don't have to be worried that you're like over diversified or not diversified enough my diversity really makes it easy for passive investors to just like leave your assets in those funds hands off take a step back don't touch it just let it sit for a while if you do want to be more hands-on with your investments and you are more interested in like really diving in deep and investing in individual stocks it's a different approach i'm not trying to like get rich quick i'm all about building my wealth over time and this is a great approach for that it's generally really low costs and fees so i'll be talking about vanguard because that's what i'm invested through and it generally has very low expense ratios or fees essentially so you might pay like a financial manager around one percent a year but with something like an index fund you're usually paying about like 3.03 a year and vanguard has some of the lowest fees around so to build a three fund portfolio it's basically two steps you pick your funds and you pick your allocation you can either be more aggressive or more conservative like i said when you're on the younger side it does make more sense to be more aggressive because you have more time in the stock market versus later in life when you're getting closer to retiring you're going to be taking some of that money out you want to be a lot more conservative so we defined index funds earlier let's define bonds as well basically a fixed income instrument made from a lender to a borrower it's often made through big corporations or the government so it's known to be super like safe and predictable yes that is the ice cream man coming down my street right now when it comes to now selecting those funds like i said you can invest in u.s stocks international stocks and u.s bonds so we're gonna be looking specifically at vanguard you can also invest in these types of funds through like charles schwab and fidelity they have specific names so if you want to go ahead and invest in them through vanguard for the u.s stock section the most popular one is probably vt sacs or btsax which is the vanguard total stock market index fund the popular international one has the ticker btiax it's a vanguard total international stock fund for bonds there's different ones to choose from the popular one is vt blx or vanguard total bond market fund like i stated earlier you can also find the etf equivalents for these within this refund portfolio you're gonna be tracking the domestic us stock market the international stock market as well as a bond fund an allocation is basically what percentage you want to put into these different categories so it's important to keep in mind that there's no perfect answer there's no one size fits all it's super dependent case by case what fits for you the amount of risk you want to take how volatile you want your investments to be again like i said later or earlier on in life main factors to think about our age time and risk so you know what age you're at right now how long you're going to be in the stock market the amount of risk you want to take honestly if you have like a bit of a bigger appetite for risk which again it's not as risky as it would be investing in individual stocks you might not even want to invest in any bonds but i mean that would kind of defeat the purpose of this being a three fun portfolio video but something to keep in mind so there's some popular percentage breakdowns that i was reading about on the internet so an 80 20 allocation is kind of known as being more risky and like more an equal allocation is known as being like super mid-tier so i think 33 u.s domestic stocks 35 international stocks 33 bonds and then there's more like the 2080 approach which is considered super conservative so again it depends on your station of life so bonds are usually the element within this percentage that kind of depends on like how volatile you want your investments to be bonds are basically known as to be super super stable so the more bonds you have the less risk your investment is and the lower the bonds you have the more risky your investment is but when you're younger i mean again i'm not a financial advisor but you want to be a little bit more active in the market to help build that wealth over time whereas bonds are something you want to use when you're like later on in life to really make sure your investments are staying stable and safe as you're approaching retirement going back to our friend mr bogle in his book it recommends for younger investors like around an 80 20 split so that means in stocks and 20 in us bonds when it comes to the 80 in stock so that's when you have to figure out your percentage breakdown between the us domestic stocks and the international stocks again this is a personal decision to kind of look into it for the more of like an expert approach i looked at the vanguard target fund what they do i got my notes down here and it's 2050 target date fund allocates of its money to u.s stocks and 36 to international stocks i feel like i know the us market better than the international market so that number from you might be higher when it comes to u.s stocks but that breakdown is really up to you i was reading online and kind of how to figure out what is a good allocation there's this approach of taking your age and subtracting it from 110.

so i'm 24. if i subtracted it from 110 that would mean 86 goes into stocks when the rest goes into bonds honestly in my case i'd say like 90 to 95 percent goes into stocks because i'm like i'm younger i'm willing to take more risk so that's basically it for the three fund portfolio it's definitely something to keep in mind with this is this is a long run game this is about building wealth over time it's not about getting rich quick so it's putting in money consistently over time and then taking it out you know years down the road and this is gonna help your money grow over time rather than just sitting in your bank account where it's literally losing money because of inflation like make your money work for you i think it's good to keep in mind to set some clear goals for yourself for one you're more likely to save your money and invest your money when you have a goal whether it be like buying a house or a car or like a wedding or whatever the case is setting those goals is really going to like help you actually stay on track and these long-term investment strategies are as good as the money you keep putting in so you really want to consistently contribute to it also if you want a kind of dollar cost average it out as opposed to putting all your money in at once that means like slowly putting your money over time so you're kind of making sure you're hitting like these different points with where the market's at that's an approach as well but again by adding it consistently you're going to keep expanding your wealth over time and it's going to keep growing over time with you know this positive historical rate of return it's usually around like 8 sometimes higher depending on the year there's the age-old saying that time in the market beats trying to time the market it's better to just start putting your money into the stock market again there's so many different ways to invest your money so look into it for yourself hopefully this was helpful if you were curious about like how do i go that next step with investing and like where do i actually put my money those are some popular funds to look into in a popular approach to kind of break down the money you're ready to put into the stock market and start investing so if this was helpful i'd really appreciate if you give it a little thumbs up a little comment make sure to subscribe it really helps me out i'd appreciate it as usual thanks so much for watching until next time