(Prosperity - Brian S Glaser)
After searching high and low for a good financial advisor, I found the perfect one on the pillow next to mine. My wife, Eileen, handles the bank accounts, investment portfolio, and all fiscal matters big and small for our household. Pillow Talk is an ongoing look at marital finances, informed by the smart money manager who happens to be stuck with me for life.
When we decided that Eileen would be our family's finance guru, she put investing in stocks high on her priority list. Since she'd never traded stocks herself (having a few funds in her company's 401(k) didn't count), it was hard to know where to begin--to the uninitiated, the stock market seems like a wild, wide-open terrain full of quicksand.
The first thing she decided to do was do some "practice investing." Eileen set up an account on Yahoo Finance and picked some stocks, but she didn't actually buy, instead tracking the results as if she had real money riding. Sure, Ms. Stock Picker missed out on some big wins (and losses, thankfully), but she also got to play the market calmly and rationally, paying attention to what went up, what went down, and how it all worked.
That part went fine, but it had an unintended consequence: Because Eileen was looking for investment-worthy trends, she felt compelled to read all the business news and it was driving her nuts. She had a full-time job, and this was like looking for needles in a haystack. She even subscribed to Value Line's Special Situations Service (a ridiculously detailed assessment of certain stock picks, mailed bi-weekly by subscription) hoping it would help her pick the right companies.
No dice. While she liked the advice about spotting hot sectors (such as, "People are spending more on their pets, so look in the pet-supply sector"), spotting an industry turned out to be much simpler than drilling down to the right stocks. Some people like to research all the companies out there--Eileen quickly realized that she is not, in fact, one of those people.
That's when my better half discovered Exchange Traded Funds. An ETF is like a mutual fund, but you can buy and sell throughout the day (with a trading fee similar to that for stocks). They have low expenses and give an investor the ability to both build a broad, well-diversified portfolio, as well as really hone in on an industry. She pitted some ETF purchases against some Value Line Special Situations-recommended stocks, and found that the ETF gave her more investment bang for less attention and effort. Suddenly, it was possible to invest in a whole sector, like pharmaceuticals or technology, rather than having to zero in on one company.
With this shift to ETFs, Eileen felt confident enough to put up real dough. The ETFs allow her to invest wisely relative to the amount of time and energy she has for research, tracking and trading. We're playing the markets, but investing in sector-wide funds mean that we don't feel like the market is playing us.
