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By Jason Stipp | 02-08-2011 05:20 PM

Great Investments for Getting Started

Morningstar's Christine Benz shares her best starter investment ideas for both hands-on and hands-off investors.

Jason Stipp: I'm Jason Stipp for Morningstar. As with many things in life, getting started can be one of the toughest steps of investing, but Morningstar's Christine Benz has some great ideas for starter investments to help get you going. She is joining me today. Thanks for being here Christine.

Christine Benz: Jason, great to be here.

Stipp: So before we start to talk about these great starter investments, there are a couple of questions that an investor starting out might want to ask before starting to select individual holdings.

Benz: That's true. One of the first steps would be asset allocation, so think about what is a logical stock/bond mix where given where you are in your life stage. That is arguably the most fundamental decision that every investor should make. Then I think another more philosophical question is how hands-off or hands-on do you want to be with your portfolio. Do a little bit of soul searching.

If it turns out that you really don't care to spend a lot of time managing your investments, you might want to set up a portfolio that allows you to be very hands-off. If you do want to have tighter control over your asset allocation and maybe you are also willing to invest with active managers who you think have the ability to outperform and you want to spend time selecting them, then you are okay with a more hands-on type portfolio.

Stipp: So we're going to talk about some ideas for both sorts of investors today. The first one is for those people who might want to be hands-on with their asset allocation. But also its an easy way to do that as far as managing the investments using ETFs. What are your ideas?

Benz: So ETFs and traditional index funds great building blocks for starter portfolios. One reason I would call out ETFs especially right now is that one of the big barriers for smaller investors has come down on many brokerage platforms, so you aren't paying fees to buy and sell -- trading costs to buy and sell ETFs.

So one of the core ETFs I would point to is Vanguard Total World Stock Market ETF and so this is an index fund that tracks the global market capitalization and to me it's a logical extension of indexing. So if you believe that by indexing you are just going to let the chips fall where they may, you are not going to make decisions about sectors or market cap or anything else. To me, using a truly global portfolio that is indexed is the logical extension of that thought process.

Stipp: If you wanted to be a little bit more hands-on and manage your domestic versus your international there are some ideas for that as well.

Benz: Right, so you could go with Vanguard Total Stock Market ETF that is VTI is the ticker and then Vanguard FTSE All-World ex-US ETF would be an idea for the foreign component and that would give you a little more hands-on control over that global decision.

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