There are many different investment styles but the first two I am going to discuss are Growth and Value investment styles. First off, what is an investment style? Investment style refers to different style characteristics of equities, bonds or financial derivatives within a given investment philosophy (Investment Style, 2018). Everyone has their own investment style they prefer. The style an investor chooses to use typically depends on what the investor is wanting to accomplish, their risk tolerance, and their investment timeline.
You may or may not have heard about www.betterment.com. If you have, bear with me as I give a little background to the amateurs reading this. Betterment is a fairly new investment platform, kind of like Vanguard or Ameritrade. What makes it so unique is the methodologies they use to invest your portfolio. They use science and math and statistics and have developed very sophisticated algorithms for investing. They claim they can make an additional 2.66% return per year than someone doing it on their own (Betterment.com, 2018). According to Betterment.com that figure (2.66%) is after their management fee which is 0.25% for most accounts (Betterment.com, 2018).
If you have a monthly budget and don't have spending money budgeted in for yourself, stop now! You are going to lose your f***king MIND! One thing I have learned from having a monthly budget is that having spending money every week is very important to keeping one's sanity. My wife and I a couple of months ago tried to go a whole month without having any money to spend on ourselves -- we failed within 2 weeks.
What do I think about this claim? I personally think if you do not know how to analysis companies and do not how to diversify your own portfolio with different stocks then you should buy into mutual funds. Mutual funds are a super simple way for anyone to automatically diversify their portfolio. So, if you do not know what you are doing when it comes to investing and picking and choosing stocks/companies you want to purchase then buy a mutual fund. If you know how to analysis stocks/companies and know how to diversify with stocks on your own, then do not buy mutual funds. It is really that simple.
So, where did I start? I started with the most basic and simplest savings suggestion and the most popular advice I read was the 50/30/20 rule. This guide means you spend 50% of your income on necessary items (house, cars, clothing, food etc.), 30% of your income should be spent on entertainment items (going out to dinner, movies, internet services, TV packages etc.), and then 20% of your income should be put in to savings. (continue reading below)