Invest in ETF with your first $5,000!

3 min read

If you don’t know what an ETF is, click here. Let’s take a simple example following the previous article and show you how to invest in ETF. Check this article out if you’re still tackling on debt.

$5,000 of Chump Change

You stumble upon $5,000 of Chump Change. Your next step is to send me an email so we can be friends! OK just kidding. We can’t be friends just yet. Not until you’re done reading this article.

So seriously, you have $5,000 and you’re doing the right thing by wanting to make it WORK FOR YOU as opposed to buying dumb things. You want to invest it.

You’re faced with a few choices:

  1. Real Estate Market
  2. Stock Market
  3. Certificates of Deposit
  4. Savings Account
  5. Mafia Loan

Never-mind that last fleeting thought. Don’t ever do that.

Keeping cash in savings account is not a good idea.
0.08% Annual Percentage Yield: This is how much the average savings account in the USA is earning.

Decisions, decisions…

Let’s run through your choices:

  1. Real estate: that 5k won’t take you very far in real estate, maybe just enough for a very, very low down-payment on a shitty-looking house, but you want something a bit more LOW-MAINTENANCE, MORE ACCESSIBLE, that produces CASH FLOW.
  2. Stock Market: You’re in the right place.
  3. Certificate of Deposit: basically your money is locked until maturity date and the average yearly rate is 1%. Not bad, but not life-changing either.
  4. Savings: If you’re like the majority out there, then you’ll leave it in your trusty savings account… earning you a whopping average of 0.08% yearly.
  5. MAFIA LOAN: OK sorry, I can’t help myself.

So we kind of ruled out everything but #2 at this point, and we’ve decided to explore stock market investing deeper.

In the stock market you have 2 strategies: You can day-trade or you can buy and hold.

We’re not day-traders, so leave margin trading up to the professionals as you will ABSOLUTELY get SMASHED as a newbie to the market.

Then, our next best strategy is:

BUY AND HODL

HODL

Yes, it is not a typo. HODL.

You’re buying shares and HODLing (Holding On for Dear Life). I’m going to keep using that word, so get used to it.

“Ohhh I get it Change Chumps!!! I’m gonna buy the next Amazon/Apple/Google, hodl them and make a KILLING when I sell. Let’s get some!!!”

No, no, no and no. We’re not expert stock pickers either.

But I can just do what Warren Buffett does!!!

Yeah OK. I’ll wait here.

Like getting good at any craft, that takes a ton of research and time to master. So unless you stop watching those 5 hours of TV every day and dedicate that time to the art for years and years, then it’s not going to happen.

“F*** me then Change Chumps, what do I buy?”

Oh my god, I thought I’d made it clear this whole time.

We’re going to invest in ETF and let them work for us! Duh!

Equity allocation when I invest in ETF

But Change Chumps!! WTF do I buy?! There’s so many choices?!?!

It’s true: there are a sh*tload of choices.

Here’s the magic formula I wish I had known about years ago when I first started investing:

80% VTI (Vanguard Total US Stock Market ETF)

20% BND (Vanguard Total US Bond Market ETF)

Basically by holding 80% stocks, you will benefit from capital gains, dividends, and hedge against inflation. Consecutively, by holding 20% bonds you will smooth out the ride and volatility in the stock market because bonds and stocks of one economy tend to move opposite of each other. Also, I buy Vanguard ETF through Vanguard because they’re commission-free and low-MER.

Shit Change Chumps!!! That’s it?!?!

Yup, that’s it. In a nutshell. Keep in mind that portfolio composition is largely dependent on which country you live in, what your risk tolerance is, how aggressive of an investor you are and your age. Someone closer to retirement age would probably want more bonds to keep fluctuations down.

Some people add international stocks, others prefer a 60/40 stock/bond ratio, etc… Of course, we can cover details in later posts!

Most importantly, let’s go back to our $5,000 example and split it 80/20:

AssetAllocation$ allocatedCurrent ETF price# shares to buy
VTI80%$4,000$141/share28 shares
BND20%$1,000$80/share13 shares

Done and done. Now you know what to buy and hodl.

And as a bonus, here’s a walk-thru video of how to invest in ETF on Vanguard in less than 2 minutes! My portfolio for this account is slightly different in composition so you will see VEU in there, but don’t worry! Just apply the buying instructions to your case and that’s it!

Watch me as I invest in ETF in less than 2 minutes!

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