#32: The Finance Flash Go Podcast | Important Topics About Money | Physician Side Gigs

Today on the Finance Flash Go! podcast, we are discussing the classic three fund portfolio. Ok, let’s take a step back and chat about stock and index fund investing again. When you buy a company’s stock, you are saying that you believe in that company’s success. If you are right, like with Apple, you make a lot of money. If you are wrong, like Enron, you lose all of your money. Picking the right company, or horse, can be difficult even for the “experts.” When you buy the whole U.S. stock market, you are saying that you believe in the overall ingenuity and innovation of humankind and the U.S. economy So, if you make this bet and you are right, you make money. If you are wrong, the economy and civilization as we know it collapses. Your portfolio will be the last thing on your mind. Everything to gain and nothing to lose. Betting on the whole stock market is a much safer bet. Over the long term, the overall stock market has always gone up. If you put money in the overall stock market at any point in history and just did nothing and kept it there for 20 years, you would have made a lot of money. This is largely what you are doing by investing in broadly diversified index funds. For example, the brokerage Vanguard (my favorite for its low costs and ease of use) has an index fund of every stock in the entire U.S. stock market. Buy that index fund and you own the next Enron, but you also own the next Apple. And everything in between. You will be investing in the innovation and entrepreneurial spirit of humankind. So, that’s the first “fund” of your three fund portfolio: US stocks. Now, you may want to also bet on the global economy in addition to the U.S. economy. So, you can buy a broadly diversified international stock index fund. That’s part 2 of your 3 fund portfolio: Global stocks Hmmm…still feeling like you’re taking on too much risk by putting all of your savings into stocks, even though you’re not planning to need it for 15-20 years. No problem. You can buy a bond index fund just the same way as a stock index fund. The performance of bonds does not correlate with the performance of stocks, so you are now diversifying. And now your 3 fund portfolio is complete with the last component: Bonds. This is a very simple yet very smart investment portfolio. Please enjoy the Finance Flash Go podcast! We plan to release a new episode every weekday answering important finance questions. If you ever want to submit a question to our podcast, send an e-mail to [email protected], and please be sure to check out Jordan Frey’s blog prudentplasticsurgeon.com where he gives great financial advice. A brief disclaimer While we are providing knowledge and awareness around financial topics in this show, we are not held responsible for any financial decisions you choose to make in response to the podcast. We hope to provide accurate information in regards to money and different methods of wealth creation, but it is always the learner’s responsibility to due their due diligence before making important financial decisions. We hope you enjoy the show and thanks for tuning in, and if you like the podcast please subscribe, share, and leave us a review on the podcasting platform of your choice!