Your first investment

If you are a brand new investor the question often comes up “what should my first investment be?”. You can ask lots of people this question and get lots of answers. If I was a new investor today I would purchase a no load S&P 500 mutual fund. I have accounts with multiple brokerages (I will add a future article about different brokerages) but my primary brokerage currently is Fidelity and so I own Fidelity 500 Index Investor (FUSEX 99.16 -0.68 -0.68%). Most brokerage has something similar.

But why?

The S&P 500, short for the Standard & Poor’s 500, is an index fund of 500 very large companies. It captures approximately 80% coverage of the overall stock market capitalization.

To be part of the S&P 500, a company must have a market capitalization greater than or equal to $6.1 billion as well as several other requirements. These are large, household names. It is a great way to create immediate diversification.

How much?

If I was starting over as a brand new investor, I would suggest putting $2,500 in an S&P 500 index fund and then $500 a month each month on the same day of the month (“dollar cost averaging”) until I had $10,000 in that fund. Once I had $10,000 in that fund as a good basis I would start on other investments. If necessary, you can adjust the initial investment as well as the monthly investment to fit your budget, but I would not change the $10,000 amount.

This $10,000 is a wonderful foundation that will provide steady and stable returns most years while you are able to fine tune your investments.



This post was originally written on July 26, 2018, and is not intended to convey legal, accounting, investing, or other professional advice. I’m not selling anything. I am not a registered stock dealer or broker or anything like it. I’m just sharing ideas I have in stock market investments. My ideas are subject to change at anytime. I have not been compensated in anyway for any of Mike’s Stock Picks.
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