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THE LAZY PERSON'S GUIDE TO INVESTING These 5 steps will help formulate a low-maintenance plan for meeting your financial goals -- and you'll barely have to move from your beach chair. By Kathy Kristof - MSN Money - 7/9/2009 At the end of every quarter, Wall Street's current geniuses trot out their latest returns to show you where you should point your investments to profit in the future. Don't listen. If the recent performance of banks and brokers hasn't proved how wrong these experts can be, consider that following their advice would turn you into a trading machine. Copious academic research has shown that's bad for your wealth. Other academic studies say there's little "persistency" in mutual fund returns. Translation: Today's investment darling is likely to be tomorrow's dog. You'll be far smarter -- and calmer -- if you put together a lazy investor's portfolio that requires about 15 minutes of monitoring a year. You'll earn as much as the experts, and you'll do it without breaking a sweat. And you'll have the money you need when you need it. How do you do it? There are five steps. The set-up will take more than 15 minutes but probably not more than a couple of hours. Step 1: Put dollars to your goals Start by writing down the things you need and want. Common goals include an emergency fund, the money to send the kids to college, a down payment for a house or car and enough money to retire. Figure out how much you need for each of those goals, one by one. For emergencies, contemplate the worst that life could do to you. Say that's losing your job. Do you have a spouse who could pick up some of the slack? How much would you need to take from savings? How long would it take to find another job? If you think it would take six months and, after unemployment insurance and your spouse's income, you'd need $1,000 a month from savings, you need a $6,000 emergency fund. What about other emergencies? Unless you have an unusually tumultuous life, emergencies tend to happen one at a time. Save for the biggest disaster. It's tougher to put price tags on long-term goals, but start by thinking about what you want. When saving for college bills, for example, think about whether you want your child to go to private or public school -- and whether you're willing to foot the entire bill. Then check the price of public versus private colleges with the College Board, which does an 1
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annual survey of average college pricing and publishes prices on a school-by-school basis. (Use the "college search" button to look up an individual school. If you're trying to figure out if you're likely to qualify for aid, fill out the site's EFC calculator.) If your child is years from college, you'll need to adjust for inflation, which the College Board
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This note was uploaded on 09/12/2011 for the course FINANCE 101 taught by Professor Staff during the Spring '10 term at Temple.

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