Are You Smarter Than A 5th Grader

If you’ve never invested before, the whole process can feel pretty intimidating.

How much of my money should I invest?

What type of account should I put my money into? Do I invest in multiple accounts?

Where do I store my investments? What do I invest in?

What happens if everything crashes?

The list of questions goes on and can often lead to decision paralysis.

You may be reading this and thinking, “Dan, I don’t even have a dollar to invest right now, I’m struggling just to get out of debt.”

And if that’s you, focus on getting out of debt. Kindly ignore this email, and maybe just come back to it after you get rid of the debt.

For everyone else, I wanted to try to break down an investment strategy that’s so easy a 5th grader could do it—a strategy that will beat 88% of professional investors.

Investment Account Set Up

Whether you’ve been investing for years or have invested $0, you want to make sure that you have the appropriate accounts set up.

Not all accounts are created equal. Here is a list of the accounts that I have:

1.  Checking - I keep about $10k or less in this account at a time.

2. High Yields Savings Account - It’s ideal to have 3-6 months of expenses in here for emergencies only. I use Ally Bank

3. Sinking Fund - These are savings accounts used to save for something specific like a vacation or future expense. We are saving up for our next home. (HYSA, again Ally)

4. 401k - Retirement account your company offers. (Fidelity)

5. IRA - I use to roll over old 401k’s and contribute for tax-free gains. (Pension Bee)

6. HSA - Health savings account, triple tax advantage.

7. Brokerage Account - For investing additional income. (Vanguard)

Your income is your greatest wealth-building tool. Make sure you are minimizing taxes and fees by using the right accounts.

Some of these accounts have contribution limits that are important to know about. And you might max out what you’re able to invest simply by maxing out your 401k and IRA.

If you want to max out your 401k you would need to contribute $1958/ mo or $979 each paycheck.

For your IRA you would need to contribute $583/mo or $291 each paycheck.

For your HSA you would need to contribute $345/mo or $173 each paycheck.

Doing all three of those things would cost $34,650 per year. Now I recommend investing at least 20% of your after-tax income. This means that if you’re making about $200k/year you would be maxing out all three of these accounts by investing 20%.

If you want to invest more than 20% or you make more than $200k/year then you want to make sure you have a brokerage account set up. You can’t go wrong with Vanguard in this case.

Once you have all of your accounts set up, you will log in to your payroll system company likely has and automatically distribute your paycheck into each of these accounts so your investing can be automated.

What to Invest In

I’m going to share with you the strategy that I use for investing my money. It’s called the three-fund portfolio or Boglehead Strategy.

Coined after the founder of Vanguard John Bogle, this strategy beats 88% of professional investors and to be honest, most financial advisors will invest your money this way. (at least the good ones)

First, you’re going to split your investments across three different funds:

• Total Market Index

• Total International Market Fund

• Total Bond Market Fund

You’ll use your age to determine the % that goes into Bonds - so if you’re 30, 30% of the money you invest goes into Bonds.

You’ll then split the remaining % across the Total Market and the International Market. Vanguard recommends at least 20% in International. Pretty simple!

The funds that I use are all Vanguard funds, you can use others but the Stock Ticker/Symbols that you would be looking for are VOO (total market), VXUS (international market) and BND (Bonds).

Here is the great news though, you only need to apply this strategy to your brokerage account.

For your 401k, IRA and HSA you’re going to do two things:

• Invest in target date funds where the target date is your retirement year.

• Focus on low-fee/low-expense funds. (Under 1%)

The amount of effort this requires to maintain is less than 30 minutes per month. To be honest, maybe even less. And doing this will allow you to achieve the gains I talk about in my videos. ***Over an extended period - 10+ years

If You Want Me To Walk Through This Live