How To Invest $500 For Retirement - InvestingChannel

How To Invest $500 For Retirement

Proprietary Data Insights

Top Packaged Food Stock Searches This Month

#1Kraft Heinz Company13,787
#2General Mills9,779
#3Beyond Meat6,293
#4Lamb Weston Holdings5,522
#5Hormel Foods5,512
#ad Beyond Traditional Investments: Embrace Diversity

How To Invest $500 For Retirement

Consider this part one of an indefinite series. Because in something so seemingly simple, there’s so much to cover. 

Investing isn’t as simple as reading a few articles, settling on some approach, then buying a bunch of stocks. Because stock picking is hard. And achieving diversification is even harder, especially when you’re picking stocks and even when you take the relatively simple route of buying ETFs. 

Just so you know, we have an online site with an index of all the past Juices. You can get to it from here

If you scroll through the list, you’ll find several articles that set the stage for our $500/month series as well as more than a few on the ins and outs of ETF investing. We’ll keep them coming, but that site can help you get up to speed if you just subscribed or deleted old emails. 

Anyhow, there are lots of cute ways to decide on stocks to invest in. 

For example, you’ve likely heard people say go to the grocery store, walk down the aisles, look at products you buy or see other people buying, read the labels and buy those companies. 

Easy enough. Because, in theory, buying perceived stability at the company level should help you see yourself through a long-term objective such as retirement. 

If you undertook that exercise, you might have gone home one day and bought the stocks that populate today’s Trackstar top five of the most searched packaged food stocks across our 100+ financial media partners. 

If you did that a year ago, you would have lost some money. 

The only stock in the bunch up over the last year is Lamb Weston Holdings (LW). The rest are down double digits with Beyond Meat (BYND) taking the fake cake at minus roughly 67%. 

But it’s not merely about losing money. It’s about the idea that anyone who suggests walking the grocery store is a good way to stock pick is crazy. It might be a decent way to teach your kid about the stock market. But it’s no way to pick stocks. 

Because …

What is diversification?

According to FINRA, it is —

Diversification is the spreading of your investments both among and within different asset classes. And rebalancing means making regular adjustments to ensure you’re still hitting your target allocation over time.

Fair enough. 

Among asset classes. So, depending on your goals, timeline and risk aversion, you want a mix of stocks, bonds, cash and whatever else suits your fancy. 

Within asset classes. Consider bonds. Maybe you want some Treasury bonds, investment grade fixed income bonds and high-yield junk bonds. 

In stocks, where do you even begin? 

To be clear, diversification isn’t about generating returns. It’s about guarding against risk. Reducing the volatility of your portfolio. 

If we’re being honest here — and why not? — we have to say we think it’s next to impossible for most individual investors to achieve true diversification. The closest they’ll come is via ETF investing. But, even then, as we have been discussing, it’s not easy. 

Why do we have this bug up our ass? 

Because there’s a tendency among some investors … Actually, The Juice has felt this way before so we have to assume other people have as well. 

For people obsessed with the stock market, it’s difficult to say, okay, I am just going to own a bunch of ETFs. You want to stock pick. There’s the thrill of it. You think you’re good at it (and maybe you are). There’s the ever present possibility that you’ll pick a stock that takes off and makes you rich. Or at least nets you some meaningful money. 

Some folks might take exception to this, but we think that, for quite a few investors, this isn’t investing, it’s speculation

Now, there’s nothing wrong with speculating. However, we think it’s a problem when it makes up the bulk of your trading activity. When it is your strategy, but you think it’s accomplishing something as complicated as constructing a diversified portfolio

So, with the $500 a month — or whatever amount of money you have — we think 10% to 20% should be allocated for speculation. Maybe even slightly more. Ultimately, you want to meet the needs of your core portfolio (which we will define in future installments of this series). Once you do that, you have extra cash to send in other, more speculative directions. 

Abstinence doesn’t work. The lure of picking stocks is too strong for many investors. You gotta scratch that itch. You just have to ensure you do it responsibly. 

The Bottom Line: With that out of the way (and, by the way, we hope you love these types of discussions as much as we do), we’ll operationalize this when we come back to our $500 a month series, which is part of The Juice’s 2024 focus on retirement. 

If there’s anything else you’d like us to cover on retirement, or in another area, please feel free to use the feedback link at the bottom of this email.

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