Investment Vehicles
| Type | What It Is | Risk |
|---|
| Stocks | Ownership in a company — price rises/falls with performance | High |
| Bonds | Loan to government/corporation — fixed interest payments | Low |
| ETFs | Basket of stocks/bonds traded like a stock — instant diversification | Varies |
| Index Funds | Track a market index (S&P 500) — low fees, broad exposure | Medium |
| Mutual Funds | Actively managed pool of investments — higher fees than ETFs | Varies |
Key Principles
| Principle | What It Means |
|---|
| Dollar-Cost Averaging | Invest fixed amount regularly — buy more when cheap, less when expensive |
| Diversification | Don't put all eggs in one basket — spread across sectors, geographies |
| Compound Interest | Returns earn returns — $10K at 7% for 30 years = $76K (without adding a dime) |
| Time in Market > Timing | Missing the 10 best days in 20 years cuts returns in half |
Simple Portfolio (by Age)
| Age | Stocks | Bonds |
|---|
| 20s-30s | 90% | 10% |
| 40s | 80% | 20% |
| 50s | 70% | 30% |
| 60s+ | 60% | 40% |
Tax-Advantaged Accounts
| Account | Tax Treatment |
|---|
| 401(k) | Pre-tax contributions, tax-deferred growth, taxed on withdrawal |
| Roth IRA | After-tax contributions, tax-free growth, tax-free withdrawal (after 59½) |
| HSA | Triple tax advantage: pre-tax in, tax-free growth, tax-free out (medical) |
Pro Tip: The best investment strategy is the one you'll stick with. A simple two-fund portfolio (Total US Stock Market + Total Bond Market) beats 80% of professional fund managers over 10 years. Complexity is the enemy of consistency.