We all need medical attention sometime, so what the heck I’m talking about a “medic account” Basically I’m talking about a “HSA” (Health Saving Accounts) We always run into a situation where you chip a tooth or like me not wearing my safety glasses and a piece of debris get in my eye. The medic account is really a unique saving accounts with a combination of a high deductible health insurance and tax benefits. When your deductible is met, then the insurance will start paying. Any money leftover is your saving and can be invested.
I have been investing in Vanguard a little over 1 year now and I’m happy with vanguard, I was using T.Rowe before but decided to switch to vanguard because of their low-cost fee and index funds. I wanted to do an in-depth analysis of vanguard so this might be a 2 – 3 part post. I will show some of the tools that I found are useful in vanguard. From my experience vanguard seem to be better than T.Rowe, easier to navigate, better investment tools, and detailed portfolio analyzer.
We’re not at the end of the month yet, but I have already decided to make a big move this month for July. I have liquidated some of my saving because I decided that I will not be buying another rental property, since I am working oversea it’s hard to find people to manage and deal with the paperwork. So I will put a hold on that goal for now, I also decided to liquidate some of my emergency fund because I don’t need that large of amount. I still have at least 3 – 6 month in my emergency fund.
There are the many type of investor that prefers different styles and methods. One may allow emotion to affect them and can make rash decision by thinking about it too much. Other may be too afraid to jump in the stock market and try to time the market. Some may prefer the automation method and try to set it and forget it. The hardest part is to figure out what style you’re comfortable with. You need to figure out the risk/return and take action. These are the different type of investors.
So when is it a good time to invest? Face it a lot of people are nervous about the market. Some have witness several bear market like the dot-com crash @ 1991-2001 and the financial crash @ 2008. Developing a plan and sticking to it will help you achieve your long term goals. (Check out my asset allocation plan Here. The key is to not panic when the market is due on a correction. Now is the time to invest!
The reason you should invest now is that no one has a crystal ball that will tell you if the market will rise or fall. The longer you wait the more procrastinating you’re doing its impossible to time the market, currently the S&P 500 is at an all time high of 1800 points. No one can tell you that next year it will gain 500 points or lose 500 points. Your best option is to dollar cost average your money into the market. This will take your mental emotion out of the way trying to time the market. The younger you are the more time you will have to ride out the bump on the road. Focusing on your long term goals will prevent you from taking any shortcuts,
What’s the best plan? To contribute a fix amount monthly, some month you will buy low and some you will buy high. Remember you’re investing toward your future, keeping your money in a saving account will do you no good because it will not be able to keep up with inflation. Sometime you have to take a little risk to gain a bit. By risk I do not mean to invest all in one stock diversify your holding and do not put all your eggs in one basket. Learn more about index investing for diversification Here. Remember the longer you wait the more time you will lose from seeing your basket grow. Just set it and forget it (Okay maybe not forget it, but just automate monthly fund to your investment account).
What is an asset allocation plan? Basically it is an individual investment plan that is pertain to your level of risk, diversification, and to achieve your financial goals. Figuring out how much risk you want to take, do you want to go 100% stock or 80% stock and 20% bond? Diversification can be investing in foreign holding, REIT, small cap, mid cap, large cap, and etc. Constructing a diversify portfolio will minimize your risk, if one sector go down the drain the other might not be affected. The other sector may be able to post some gains and lift under performing sectors. Many people have the mentality of just following the media and the hype of big company. When price drop they tend to panic and sell. Developing an asset allocation plan can ease your mind; make an effort to rebalanced your portfolio every year so your portfolio doesn’t go out of whack. Since you develop a plan you will be able to sell high and buy low. Remember you’re investing for the long term and remember your financial goals, because everyone will eventually want to retire and sitting on a beach drinking some tequila. I know I want to eventually.