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Morningstar
Special Report

Investor Starter Kit

Nov. 18-22: Build a solid portfolio from the ground up with picks and portfolio tips from Morningstar.

Jason Stipp

Cleaning out the garage. Washing the windows. Stepping on the treadmill. Doing your taxes. There is a category of tasks where just getting started is often the hardest part--where the roadblocks are more imagined than real. If you can just get going, you usually find it's not quite so dreadful after all. (OK, maybe taxes wasn't the best example…)

For many folks, investing fits in this category as well. It feels like a big, hairy task--something that will take a lot of time without a lot of immediate reward. What's more, some players in the financial-services industry feed the preconception, insisting that "today's market" necessitates all sort of impossible-to-pronounce planning tools, exotic instruments, and sophisticated strategies.

Indeed, there are any number of ways to make investing more difficult, but getting started doesn't have to be complicated. What's more, there is a real cost to letting intimidation or procrastination keep you from making a portfolio plan and investing your money. All things equal, the longer you wait, the more you'll need to save.

Morningstar's Investor Starter Kit is here to help. It's designed to direct you through five basic steps (one per day) that together form the backbone of an investment plan. Stay tuned each day as we feature new tips, tools, and picks to get you plugged in and moving forward. 

And once you're done, you can think about tackling that back closet.

Monday: Figure Out How Much You Need
It's tempting to dive straight into investment-picking (see Wednesday's features below), but doing so would be like walking into a car dealership before calculating your budget or thinking about your family's vehicular needs. To get off on the right foot, we start the week with some investigation on estimating retirement and college costs that can help you set some realistic goals for your portfolio.

Tuesday: Find the Right Investment Mix
How soon will you need your money? How much can you invest today? And how much will you invest in the future? The answers to these questions (and a couple of others) will suggest the balance of investments (stocks and bonds) you will want to own--another key conclusion that should precede investment-picking.

Wednesday: Pick Your Investments
Now that you know what kind of investments you need, we'll help you locate best-of-breed funds for your portfolio. And to customize your holdings a bit more, we're dividing our picks into a few practical categories to help investors who are keen on downside protection, tax efficiency, simplicity, and being opportunistic find good-fitting funds.

Thursday: Implement Your Plan
You have your allocation, you've picked your investments. On Thursday it's time to choose how to implement your plan. This includes deciding when to use an advisor and picking an account type--taxable accounts, Roth and traditional 401(k)s and IRAs, and 529 college savings plans have different rules, benefits, and drawbacks. In addition, we'll discuss the pros and cons of dollar-cost averaging (investing a little bit of money at a time) vs. lump-sum investing.

Friday: Monitor Your Holdings
With a good plan backed by solid investments, you'll have built a portfolio you won't need to babysit every day, but you'll still want to check on your progress from time to time to ensure your funds are pulling their weight and your allocations are on target. On Friday, we'll help you make those check-ins more productive--so you'll know not only what to look for, but also what noise to tune out so you can stay on track.

 

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