Making Your First Investments

Step 1: How Do I Get Started Once I Have My Investing Plan?

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Imagine this scenario:
You are young and you just received a $2,000 bonus check—your first entry into your investment/savings program.

Classroom Steps


 

To begin a basic investment program, you need to go through the whole asset allocation process—first determining your allocation among the major asset categories and then further down among the major stock market segments. And you come up with this mix: cash, 10%; intermediate-term bonds, 10%; and stocks, 80%—with the latter split 80% in a "core" holding of large-capitalization stocks (which would be 64% of your total portfolio), 10% in the stocks of smaller firms, and 10% in international stocks (8% of your total portfolio in each).

With much enthusiasm, you then sit down to implement your strategy by divvying up your savings: $200 to a money market fund, $200 to an intermediate-term bond fund, $1,280 to a large-cap fund and $160 each to a small-stock and an international fund. Then you select several mutual funds that match your goals.

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