This arrived in my inbox yesterday:
I was wondering what’s the best way to go about buying stocks? I have about $10,000 that I am willing to invest and right now during this melt down seems like a good time. I have never bought stocks before, do you have any good advice?
Well, since you asked…
Since you have never bought stocks before I would recommend against buying individual stocks. Instead, focus on investing in stocks via a good low-cost index fund or exchange-traded fund (ETF). Keep in mind that if you go the ETF route, you will have brokerage charges. For simplicity’s sake, I would just open an account at Vanguard and put half of your money in either the Vanguard Total Stock Market Index fund (VTSMX) or the Vanguard S&P 500 Index fund (VFINX) and half in the Vanguard Total International Index fund (VGTSX).
If you’re concerned that the market hasn’t yet bottomed, you could dollar-cost-average your way into the market by investing a portion of your money over several weeks or monthsof course that’s up to you.
The main thing is to be sure you have the stomach to ride out this storm. It could be years before we return to normal. One thing you could do to help with volatility would be to put a portion of your portfolio in the Vanguard Total Bond Market Index fund (VBMFX). Just remember that Vanguard has a $3,000 minimum investment for all their funds and since you are only investing $10,000, you won’t have enough to meet the minimums on more than three different funds.
I hope this helps.