If you’re a regular reader of Frugal Rules you know I love to talk about investing in the stock market. It’s part geek and part wanting to grow our wealth so we’re not having to work like crazy in our 80s. So, when Jeff Rose threw out an investing challenge several weeks ago for the 2014 year I was quick to jump at it.
What is the Grow Your Dough Throwdown?
I’m glad you asked! The general purpose behind the challenge, on one level, is to have a little competition between fellow PF bloggers to see who has the most game when it comes to investing. On another level, it’s also intended to help teach those who’re not investing in the stock market (or any other mode of investing) to start thinking about their future and put a plan together to help them along the way. With that in mind, following are some of the details about the Grow Your Dough Throwdown:
- Open a brokerage account at the beginning of the year
- Fund said brokerage account with $1,000
- You may not add funds to this account over the year
- You can trade as much as you want and what you want, though no margin is allowed (you wouldn’t be able to use margin anyway as margin accounts have a minimum balance of $2,000)
- Write a blog post and share publicly what you’ll be buying
- Track the progress over the year and hopefully be the winner
Who Will I Be Investing With and What in?
I’ve written quite a number of brokerage reviews as I believe it’s important to know what your options are in the brokerage space. That said, I’ve opened another account with Scottrade. As I shared in my Scottrade review, they’re my favorite brokerage for a number of reasons. They’re very competitive in terms of pricing at $7 per trade, they have over 500 local branches (one of which is about five miles from our house) and they offer great service. I also have several accounts with OptionsHouse, though we do the majority of our investing with Scottrade. There are various other good brokerages out there, including TradeKing, OptionsXpress, Etrade and TradeMonster.
Now that I’ve got my account with Scottrade open and funded, my investment choice for the throwdown will be…drumroll please…VTI, or the Vanguard Total Stock Market ETF – of which I was able to get 10 shares at a limit price of $95 per share. Real exciting for an investing contest I know. However, I do have a number of reasons for the decision. Largely, I like to invest in index funds or solid dividend paying stocks and while I do have a small part of our portfolio dedicated to more speculative (though still researched) investing, my approach to investing is long term in nature.
Essentially, when it comes to investing, boring is good as you want to be investing with the market as opposed to trying to beat the market. I’ve spoken with many retail investors over the years who waste time and WAY too much money trying to beat the market when they only end up behind it in the end. So, my point in my investing choice for this is not only to try and practice what I preach, but also show that investing with the market, for the long term, is generally the better approach to take.
My Hope in This Challenge
I’ve spoken ad nauseam in the past about investing basics. If you’d like to read some of those posts, you can look here, here, here, or here. With that in mind, there are various reasons as to why individuals do not start investing or make “bad” investing decisions and they generally go back to lack of time/education on investing to thinking they can actively beat the market, to everything in between.
It is my hope that through this year-long challenge we as a personal finance community can encourage others to take investing seriously and begin to plan for their financial futures. Not only is it a part of being financially literate, but it also involves thinking past today and looking at “tomorrow.”
My other hope is that it encourages others to see that they can start investing too and that it’s not rocket science. Yes, investing in the stock market can be difficult to start in the beginning, but the beauty is that it only takes some simple education to begin. If you’re in that boat, then please know that with a little education you can make it far with your investing endeavors.
I would also like to point out that my investing decision for this challenge is not a recommendation as each of us have our own unique situations. The reasoning behind my particular decision is that I lack the time to actively manage more stocks and simply want to invest with the market as I believe it’s generally the better approach to take as my view is a long term one and not something I’m going to accomplish quickly. That said, if you do have questions about your specific situation please consult with a trained and certified financial advisor as to what best fits your needs. If you have questions as to what brokerage to choose to begin your investing journey, you can check out my online brokerage page or you can contact me.
So, what do you think of my plain vanilla investing strategy with this challenge? What do you have planned for the weekend?
Photo courtesy of: 401(k)2013