ITA Wealth Management

Action has been the name of the game as the market declined.  A number of limit orders were struck.  These purchases plus all the portfolio updates combined to generate considerable reporting, particularly over on the Premium Content side of the blog.  It is time to take a deep breath over this weekend.

Here are a few things to focus on over the coming weeks.

• If you have not made the move to set up an investment plan, begin to lay out your long-term goals.
• An investment plan should begin with an outline of what asset classes you want to use.  Do you want to use index funds or ETFs?  If you are making small monthly deposits, be sure to use index funds so commissions do you eat up a significant percentage of your investments.  If you are investing larger amounts, then ETFs will serve you well.
• Once you have the asset classes identified, go to Vanguard as they are the standard in offering low cost investment vehicles.  If you cannot find an ETF or index fund to meet your asset class of interest, then check out Barclay’s iShares.  Don’t get fancy and fall into the trap of investing in actively managed ETFs.
• Before you make any purchases, lay out what percentage you want to invest in each asset class.  This is going to be your most difficult decision.  To aid in this decision, I highly recommend investors check out the IFA web site.  Be sure to take the Risk Capacity Survey.  Take the time to complete the survey of 25 questions.  It is also a good idea to have Mark Hebner’s Index Funds book in your hands so you can look through the portfolio you will be assigned as a result of taking the survey.  Note: The survey is free.
• At this point, your investment plan shows the seven to fifteen asset classes you are going to use to construct the portfolio.  Also, you came up with target percentages for each asset classes.  Don’t become paralyzed over the target percentage decision as you will most likely change these over time as your career or financial situation changes.  You will want to revisit your target percentage asset allocations each year.  It is a good idea to completely review the portfolio each year.
• Set up an account with a discount broker.  I happen to use TDAmeritrade, but there are others.  I happen to like TDA’s monthly broker statements and their commissions are low.
• It is now time to begin buying index funds or ETFs to populate the portfolio.  From time to time you will likely want to add a specific stock that you have analyzed and feel quite comfortable adding to the portfolio.
• How are you going to monitor the performance of your portfolio?  What benchmark are you planning to use?  Check out our spreadsheets over on Premium.  I recommend the benchmark be VTSMX.
• Now go do it.