Investment Simplification & Wealth Building

Learn if you at this time have the right investment vehicle(s) to effectively reach your investment goals…


Caution:  35-minute read, however it is “well worth your time” in The Wealth’s opinion


It is important that you start your long-term investing at the earliest time possible and there are investment vehicles that you can utilize to get you where you need to be more efficiently.


In this discussion The Wealth Increaser will hone in on some of the most useful and time-tested investment vehicles that you can use to build wealth and reach goals that you desire at the various stages of your life.


Your path to investment success does not have to be a difficult one if you start early, invest consistently and you know your “target number” that you need to reach to fulfill your various goals.


Your home purchase, college funding, traveling around the world, reaching your retirement number or reaching the number that you need to reach for any other purpose is attainable if you are at this time willing to make a serious effort toward achieving what you desire.


Mutual Funds (MFs) Investment Calculator

A Mutual fund is an investment program funded by shareholders that trades in diversified holdings and is professionally managed.  It normally includes a “bundle of stocks” and investment products and frees you from the hassle of selecting individual stocks or other investments yourself.


A MF is a portfolio of stocks, bonds and other securities and creates a diversified investment portfolio that generally reduces your risk factor.  It is key that you understand that mutual funds are “bought and sold” at the “end of” the trading day!


  • Mutual funds are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.


  • Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.  Although there are others, most mutual funds fall into categories which include stock funds, money market funds, bond funds, and target-date funds.



  • Employer-sponsored retirement plans commonly invest in mutual funds and if your employer offers them–especially with an employee match, you want to put yourself in position to contribute as best you can, based on your financial ability to do so.


Index Funds (IFs) Investment Calculator

Technically a Mutual Fund, Index funds invest in stocks that correspond with a major market index such as the S&P 500, Nasdaq or the Dow Jones Industrial Average (DJIA).  It could be one focused on a sector, such as healthcare, durable goods or technology.  This investment strategy requires less research from analysts and advisors, so your expenses as a shareholder would be lower, and these funds are often designed with cost-sensitive investors in mind.

  • The positives of index funds are that they require little financial knowledge, are low cost, and are convenient to invest in.  On the negative side, you could end up stuck with poorly performing assets and the potential for returns to be less than those of successful managers of actively managed funds.


  • The goal of index fund managers are to mirror the performance of a particular index – and not try to outperform it, which is the goal of managers of active funds.


  • Although many think that index funds are relatively new, the first publicly available index fund was launched back in the mid-1970s.


  • Index funds often perform better than actively managed funds over longer investment time frames.  Even so, there are still risks involved with this style of investing.  If the tracked index falls, then your investment’s value will follow and if it is at the time of your retirement or planned withdrawal, you will suffer financially, and your living conditions could be affected.


  • You can reduce risk by diversifying your portfolio by holding several different index funds covering a variety of stock markets or sectors.


  • Index funds can provide a very straightforward, cost-effective, and diversified way for you to steadily increase your wealth over time.  Fund managers do not decide which individual investments they should buy or sell, which is what happens in active mutual funds.


  • Investors in these products expect their chosen index to rise over the long term, even if it encounters some turbulence along the way!  The performance of the FTSE All-World Index, which has delivered an average annual return of 9.3% since 1993, according to Vanguard, provides a real world blueprint (30 plus years of results) of what index funds can achieve IF utilized appropriately.


  • So, should you as a novice investor choose an active mutual fund(s) or index fund(s)?  You can spread your risk by investing a portion in each at the level that you are comfortable with.  Again, index funds replicate the performance of an index, whereas the managers of mutual funds will pick and choose securities they believe will help them outperform that index.  If an active manager makes the right calls, then they can substantially outperform their benchmark index and deliver handsome returns to investors–normally with more risk.


Popular index funds that you may want to consider include the following:


*Fidelity 500 Index Fund (FXAIX)

*Schwab S & P 500 Index Fund (SWPPX)

*T. Rowe Price Equity Index 500 Fund (PREIX)

*Vanguard 500 Index Fund Investor Shares (VFINX)

* Schwab 1000 Index Fund

*Many others


Be sure to do your own independent research, confirm that fees are low, and you can do so by going directly to the sites by “typing in the ticker symbol” using your favorite search engine!


Target Date Funds (TDFs) Investment Calculator

Although technically a mutual fund, target date funds are separated out in this discussion in order to give you more clarity on how you can use them to build wealth.


Target-date funds are a “set it and forget it” or “invest it and rest” retirement savings option that removes two headaches for you as an investor:


1) deciding on a mix of assets which saves you time and


2) re-balancing your investments for you over time which saves you time


Target-date funds, also known as life-cycle funds or target-retirement funds—aim to continually strike the right balance between the risk necessary to build wealth and safer options to protect a growing nest egg.


The fund automatically re-balances your portfolio with the right mix of stocks, bonds and money market accounts as you age and is a great hands off way for you to build wealth if that fits your personality and risk profile!


Target Date Funds are “mutual funds” that purchase from other mutual funds (known in the “investment world” as a “fund of funds”) and they are designed to build a diverse portfolio.  While you set and forget or invest and rest so to speak, the fund updates your asset allocation over the years for you.


Early in your working life, a target-date fund generally is set for growth by having a much larger slice of your portfolio in stocks rather than fixed-income investments like bonds, which are safer but provide smaller returns (the approach is similar to that of a 529 education savings plan).  As your retirement year approaches, the fund gradually shifts toward more bonds, money market accounts and other lower-risk investments.


Your retirement year is the “target date” of most of these funds–unless you choose a target date for other purposes, and the funds are conveniently named to correspond with your planned retirement year.  Say you are 35 years old and plan to work until you are 65, a Target Date 2055 would possibly be of appeal to you.  Most target-date funds are named in five-year increments with some at 10-year increments, so you would choose the provider with a fund named with the year nearest your planned retirement date or other target date based on your goals.


Below you will find some of the more popular target date funds that you may want to consider:




Expense Ratio

Vanguard Target Retirement 2045 Fund Investor Shares



Fidelity Freedom Index 2045 Fund Investor Class



Lifecycle Index 2045 Fund Premier Class



American Funds 2045 Target Date Retirement Fund Class R-5



T. Rowe Price Retirement 2045 Fund



There are many other target date funds, and the current data is current as of market close on February 1, 2024.   Be sure to do your own independent research as the accuracy of the data cannot be guaranteed.


Always realize that the main appeal of target-date funds for most is their simplicity.   And just as an index fund operates with simplicity, so too does a target date fund!


The funds go from a “high ratio” of riskier equity funds to safer investments like bonds, and money market accounts as it gets closer to the “target date”, freezing your asset allocation in order to protect your nest egg.


An important question to ask yourself or your advisor when choosing among target-date funds is whether the account will freeze the year you plan to retire, or whether a “through” fund that continues the glide path for 5, 10, 15, or 20 years past retirement before freezing your asset allocation will be in effect.  You want to plan your approach appropriately and select the fund that’s right for your retirement or other goals.


How to purchase:


*through your retirement plan

*directly from fund

*open brokerage account ($500 to $3,000 to open)


Exchange Traded Funds (ETFs) Investment Calculator

They are similar to Mutual Funds as just a few key differences set them apart.  The biggest similarity between ETFs (Exchange-Traded Funds) and mutual funds are that they both represent professionally managed collections (or “baskets”) of individual stocks, bonds or other investments.


However, investment minimums are normally lower with an ETF!  You can purchase an ETF share of Vanguard FTSE Emerging Markets for under $100.  Many more ETF shares start at $500 or more and you can learn more about ETF offerings by visiting VettaFi financial website.


  • It is key that you understand that ETFs allow you to trade “throughout the trading day” at market prices.  This flexibility is a key difference in how the fund works as compared to a mutual fund.  This level of flexibility may be utilized by active traders making moves throughout the day.


  • The main difference between ETFs and mutual funds are that an ETFs price is based on the market price and is sold only in “full” shares.  Mutual funds, however, are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.


  • As an investor, you have options and can reap the benefits of diversification.



When you are investing it is imperative you know that your goals, risk-tolerance, income and your personal situation must be taken into serious consideration!


If you currently owe $100,000 on your home mortgage and you desire to pay it off in 5 years, you will need to do some analysis and not just choose the first thing that comes to your mind.  If your monthly payment is $1,000 and $500 of your mortgage payment is going toward principal, in 5 years your balance would be roughly $70,000 if you continued on that path.


By adding $1,200 to the monthly payment of $1,000 you could pay $2,200 monthly ($1,700 going toward your principal) and have your mortgage paid off in 5 years, however you would be responsible for paying your property taxes (mandatory) and insurance (optional after your home is paid off, but generally makes sense to have).


Or you could choose an investment strategy of investing the $1,200 per month for 5 years in the market and based on historical trends you could have over $90,000 after 5 years, and since you continued your mortgage payments at $500 per month in principal payments, you would owe $70,000 and therefore have an addition $20,000 plus after the payoff of your mortgage, in your pocket by doing so–assuming your returns were as expected.


In this example inflation is assumed to be 3% and your rate of return is assumed to be 9%.  Even if you only assumed a rate of return of 3% (same as inflation) you would have over $80,000 which would still put you ahead by over $10,000 after the payoff of your mortgage.  As long as you had a positive return you would come out ahead based on the assumptions mentioned above.


If after 5 years of investing you had a negative return you would possibly fall short of the $70,000 that was needed and you could decide to ride the market longer and pay off the mortgage later, cash in, in spite of the losses and payoff as much as you could on the mortgage.


As you can see from this discussion, your goals, risk tolerance, income and personal situation will play a large part in how you decide to pay off your debt and how you select your investments!


You want to know how to invest properly on the front end and you want to know that you can invest inside of your retirement account(s) (your earnings will grow tax free) and avoid taxes for years or outside of your retirement account(s) (you will provide 1099 and other paperwork to your tax professional that your brokerage would send to you at tax time) where you would possibly owe taxes on an annual basis (ETFs and Index funds are often tax efficient even outside of retirement accounts).


If you are age 25 and desire to retire by age 55 with your house paid off and over 4 million in your account in today’s dollars, you would have to invest $1,600 monthly for 30 years assuming 3% inflation and a 10% rate of return–and also assuming you pay your house off within that 30-year period.


Therefore, in the above examples, your returns would be affected depending on the type of investment and whether the investment is inside or outside of your retirement accounts.  Once you reach age 59 1/2 you can withdraw your retirement funds without incurring an early withdrawal penalty, however you would pay taxes at your ordinary income rate–unless the distributions were from a ROTH IRA or there was an exception that applied.


Mandatory withdrawals from your traditional IRA or retirement plan would be required once you reached age 73, however with a ROTH IRA, there are no mandatory withdrawals, however after your transition your beneficiaries must take required minimum distributions!


Also realize that you can choose balanced funds that invest in a hybrid of asset classes, whether stocks, bonds, money market instruments, or alternative investments. The objective of this fund, known as an asset allocation fund, is to reduce the risk of exposure across asset classes.


In closing, it is important that you realize that this discussion is not about theory or what you possibly need to do, but what you CAN do!  You must at this time analyze your income and expenses and determine your discretionary income that you have available so that you can start investing now, get more income by creating a plan to increase your income whether by the payoff of your debt, scaling back on your entertainment and other expenses–or finding other ways to get income on a consistent basis.


Although you will hear many financial planners tout the fact that you can increase your savings and come up with a significant amount to invest by scaling back on the $5 that you spend daily on your favorite latte or coffee, that is not something that we are a big proponent of as we realize that for some, a $5 cup of coffee can give them the added energy that is needed to help them earn more on a daily, weekly and annual basis–therefore they more than offset the $100 or so that they spend on a monthly basis on coffee that they could be using for investing.


However there are other ways that you can get more income and cut expenses and you may want to analyze and pursue them!


Once you determine the amount of income that you have available to invest and you commit to investing that or another amount over a period of time, you can start on a path to reaching the number that you need to attain your goal(s) and live daily with more joy on the inside!


Whether your discretionary or available funds to invest are $200 per month or $2,000 per month and you decide to use it to invest long-term, you can achieve significant results over a 30-year period.  By calculating what you can do now, (you need to know your discretionary or available income that you have to invest, whether you will invest weekly, monthly, yearly or a one-time lump-sum investment and furthermore you need to know the “time frame that is needed or desired” to reach your goal) you can determine the nest egg that you can have by investing consistently in a relatively painless way–starting today.


Investment Calculator


Investing $200 monthly at 3% inflation and a 9% rate of return will will provide you the opportunity to have over $500,000 (five-hundred thousand) in 30 years! 


The 4 percent raise that you get, the promotion that you get or working one or two days a month for lyft, uber, grubhub or other new economy options can easily provide you that cushion to invest either temporarily or permanently over the next 30 years.  In many cases, you can find the $200 by analyzing your monthly spending and tightening up your budget some.  You can do a detailed analysis of your insurance products, taxes and other areas of your finances and discover new savings or increases in income.  The ways that you can come up with the needed funds for long-term wealth building success is endless–if you want to achieve your goals in a sincere manner!


Investing $2,000 monthly at 3% inflation and a 9% rate of return will provide you the opportunity to have over $5,000,000 (five million) in 30 years! 


To get that extra $2,000 per month you may have to start a business, have your stay-at-home spouse find employment either part-time or full time or determine other ways to increase your monthly income based on your creativity and the unique skills that you now have or will cultivate in the near future.  In many instances high net worth and high-income earners wasted hundreds if not thousands on a monthly basis on frivolous or unnecessary spending that could be utilized more appropriately for building long-term wealth of significant amounts.


What is the discretionary amount that you “need or want to get to” so that you can invest at this time and in your future, to work towards making life more manageable for you and your loved ones?


How You Can Invest using Mutual Funds, Index Funds, Target Date Funds and Exchange-Traded-Funds:


  1. Make sure you have a brokerage account with enough cash on hand, and with access to mutual fund shares and other investments
  2. Identify specific mutual funds or ETFs that match your investing goals in terms of risk, returns, fees, and minimum investments.  Some brokerage platforms offer fund screening and research tools.
  3. Determine how much you want to invest initially and submit your trade.  If you choose, you can set up automatic recurring investments in the amount that you desire.
  4. Monitor and review performances periodically, making adjustments as needed.
  5. When it is time to close your position, enter a sell order on your platform.
  6. Realize that with some funds you can invest directly and depending on the fund type, the functions mentioned above will be done by the fund manager or brokerage.


While many mutual funds are no-load, you can often avoid brokerage fees and commissions by purchasing a fund directly from the mutual fund company instead of going through an intermediary or third party.


Expense ratio is the percentage of your account that is calculated for the fund management such as .20 expense ratio on a $200,000 fund would mean you are paying $40 for the fund management and that would have the effect of reducing your fund amount by $40 for that particular year, or if held in a retirement account the ratio would accumulate from year to year and would be subtracted out from your funds once you were to retire or cash out.


There are pros and cons of investing utilizing mutual funds and you can go to to learn more about investing in a simplified, yet effective manner!


Some funds are defined with a specific allocation strategy that is fixed, so the investor can have a predictable exposure to various asset classes.  Other funds follow a strategy for dynamic allocation percentages to meet various investor objectives.   This may include responding to market conditions, business cycle changes, or the changing phases of the investor’s own life.


The portfolio manager is commonly given the freedom to switch the ratio of asset classes as needed to maintain the integrity of the fund’s stated strategy.


Below you will find what is often included in mutual funds, including balanced funds, index funds, target date funds, and exchange traded funds.


Money Market Funds

The money market consists of safe, risk-free, short-term debt instruments, mostly government Treasury bills.  An investor will not earn substantial returns, but the principal is guaranteed.  A typical return is a little more than the amount earned in a regular checking or savings account and a little less than the average certificate of deposit (CD).


Income Funds

Income funds are named for their purpose: to provide current income on a steady basis.  These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity to provide interest streams.  While fund holdings may appreciate, the primary objective of these funds are to provide steady cash flow​ to investors.  As such, the audience for these funds consists of conservative investors and retirees.


International/Global Funds

An international fund, or foreign fund, invests only in assets located outside an investor’s home country.  Global funds, however, can invest anywhere around the world.  Their volatility often depends on the unique country’s economy and political risks.  However, these funds can be part of a well-balanced portfolio by increasing diversification, since the returns in foreign countries may be uncorrelated with returns at home.


Specialty Funds

Sector funds are targeted strategy funds aimed at specific sectors of the economy, such as financial, technology, or health care.  Sector funds can be extremely volatile since the stocks in a given sector tend to be highly correlated with each other.


Regional funds make it easier to focus on a specific geographic area of the world.  This can mean focusing on a broader region or an individual country.


Socially responsible funds, or ethical funds, invest only in companies that meet the criteria of certain guidelines or beliefs.  For example, some socially responsible funds do not invest in “sin” industries such as tobacco, alcoholic beverages, weapons, or nuclear power.  Other funds invest primarily in green technology, such as solar and wind power or recycling.  Fidelity Charitable and other “Socially Responsible Investment Funds” are now available in abundance in the investment world.



Isn’t it time that you use a “more pragmatic approach” toward investing and building wealth?

Always realize that you have numerous options to choose from in the investment world regardless of your goals, however the process of investing in an effective manner is not that complicated, unless you make it complicated.  In this short (relative to what you have learned) discussion you have learned how you can invest in a straightforward manner and achieve realistic results that can enhance your living conditions while you are here on planet earth.


All the best to your investment and wealth building success…


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