For most people they do not have the time or knowledge to invest properly.  One of the best investment companies is Vanguard.  Vanguard provides very low cost Mutual Funds and ETFs.  They never got into the Mortgage mess and are consistently rated very highly by clients.   The key though is the low cost which allows you to keep more of your  own money.

Here is my Simple Portfolio of only 4 Mutual Funds–I would invest 25% in each.  However, what is generally recommended is to invest your age in bonds.  So if you are 40 years old you would invest 40% in bonds and then 20% in the remaining 3 funds.

1) Vanguard Dividend Growth Fund: this fund invests in Large Cap companies that pay a Dividend.

2) Vanguard Small-Cap Index Fund:  this fund invests in Small Cap stocks that tend to have more risk but better growth.

3) Vanguard Total International Stock Index Fund: this fund gives you International Stock exposure.

4) Vanguard Total Bond Market Index Fund: this fund gives you exposure to the stability of bonds.  It is a mix of all types of bonds and pays a monthly dividend.

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With 5 year arms below 3% it is very tempting to think about refinancing.  Just remember re-financing also can involve a lot of fees.  This is why it is usually only worth it in the long run because it is only with time that those fees are saved through a lower payment.

There is however an easy way to accelerate payments and reduce interest.  The best way to reduce your home mortgage quickly is to participate in a 26 Payment Plan. Usually these plans are free and offered by all mortgage companies. In this plan instead of paying your mortgage once a month you will pay half the amount every 2 weeks. Since you are paying every 2 weeks you will end up making 1 extra monthly payment per year or 26 payments (13 monthly payments) per year.   By paying every 2 weeks interest does not build up all month long since you are paying more frequently.

I know that paying 1 extra payment per year can be difficult but the upside is that it will generally take 7.5 years off a 30 year fixed mortgage. If you use a mortgage calculator you will see that it will save you 10,000s of dollars.

So are some rules:

• I am an investor–I do not trade my investments frequently.
• I am also a saver–I routinely invest each month using my savings.
• I know every asset has risk and I consider the risk before buying.    I accept the risk by owning a diversity of assets.
• I have an investment plan and plan for allocation.
• I invest regular amounts each month in both falling and rising markets.
• I spread out my investments among stocks and bonds.
• My share of bonds equals my age.
• I rebalance once a quarter.
• I know that stocks are risky in the short run but not so risky in the long run.
• I force myself to sell high and buy low.  Patience is the key here.
• I put at least 20 percent in international assets.
• I stick to my plan and try not to check my stock balances every day (this one is not easy).

I just opened a new Vanguard Account.  The process took about 10 minutes and was very easy.  The only thing to be aware of is that a new account requires a minimum of $3,000. for each fund that is opened.  The great thing about Vanguard is the account expense fees are very low.  Most of the mutual funds at Vanguard have an expense fee of around 0.20%.  Mutual funds generally have fees in the 1% range.  So the savings are substantial.

I decided to open the Vanguard account in order to diversify my portfolio and reduce risk just in case another major financial institution goes broke.  I currently have an E-Trade account that is used to purchase stocks that focus on dividend yield.  I also have a Merrill Lynch Account that is professionally managed.

I will post my mutual fund strategy in the next blog.