July 1st, 2011
As a company our services are tailored to larger portfolios, but I know lots of people come to our site that just have a few thousand or even a few hundred dollars. So here are some ideas for you.
First, do something. The longer you wait, the less you will earn. A big part of investing is the power of compounding. The sooner you start, the more your investment will grow.
Second, you need to determine your investment horizon. When do you plan on using these funds: next month, next week, or thirty years from now. This is important for picking the right investment. Next, determine your risk tolerance.
If the investment horizon is relatively short, then look towards high yield savings accounts, reward checking, or CDs. One thing to keep in mind is of course the time it takes to set those up. Because time is money also. I did a review of Aurora Bank on this site. They have good rates for small, short-term investments (and large). DepositAccounts.com also keeps track of numerous bank and credit union deals.
For a longer horizon (5 to 10-years), I would look to a simple portfolio of index funds or ETFs. Someone that likes high reward (and thus high risk), may have an 80% stock / 20% bonds portfolio. The stocks can be split up between US, International, small, mid, or large cap, etc. Bonds could be strictly government bonds or sprinkle in some high quality corporate issues.
The more conservative you are, the more you will weight your holdings towards bonds. My broker allows for commission free ETFs and they had a decent selection so I went that route. Frankly, I am not very risk tolerant so I decided on on 25% US stocks, 25% REITs, 25% TIPS, and 25% Short-term government bonds. I figured with real estate mostly at the bottom it has no where to go but up (sort of). So far the REIT and TIPS ETF are performing the best. Once I feel the economy is on surer footing I will probably adjust my stock percentages, but frankly I am not sure I could take wild swings very well. I may even close a portion and move it to a CD. Even the returns are low, they are guaranteed.
So what are you folks doing?
Image by: Image: dan / FreeDigitalPhotos.net
-- By +Chris Duncan