Investing

Young Finances Joins Investing Challenge

investing challenge

It’s time for a good old fashioned throwdown! Time to take my earrings off and get serious!

investing challenge

I’m taking part in the Grow Your Dough Throwdown. In this challenge, started by Jeff Rose of Good Financial Cents, I have one year to grow $1,000 by investing any way I’d like.

Here are the Investing Challenge rules:

1. Open a new broker account of your choosing and deposit $1,000.
2. On January 1st, invest anyway you want (stocks, ETF’s, mutual funds, whatever). No margin allowed.
3. You can buy/sell as much as you want.
4. You cannot add any more than the original $1,000.

Now on to my plan to win this challenge.

I will be taking a simple approach to investing. I’ve already discussed in this video my thoughts on how to start investing as a young adult. There are two basic ways to invest, in a passive manner and in an active manner.

For this challenge, I plan to use a bit of both. I want to show you how easy passive investing can be, as well as how to pick stocks if you want to actively invest.

The 60/40 Investing Plan

I plan to invest 60% of the funds in a passive manner, and 40% in an active manner.

For the passive portion, I am depositing $600 dollars with Betterment, my passive manager of choice. I’ve talked about Betterment several times and how much I like the service.

Who is Betterment?

Betterment

Betterment is an easy way for young adults to invest. You simply deposit cash into your Betterment account and they invest in ETFs for you. No need to research stocks or decide on where you want to invest. You can choose an allocation between stocks and bonds. In this case, I plan to choose 80% stocks and 20% bonds.

For the active portion, I am depositing $400 dollars with Loyal3.

Who is Loyal3?

Loyal3

Loyal3 is a service that allows you to buy partial shares in companies that you know and love. My 3 step investing strategy starts with looking at companies that I already know and love so this broker fits right in line with my stock picking strategy. I’d like to be pretty diversified and with only $400 dollars I need a broker that allows me to buy partial shares.

Active investing is often more expensive because of the fees involved. Either fees to buy and sell stock or fees to pay a manager to do it for you. The great thing about Loyal3 is that there are no fees to invest! How awesome is that?!

How To Determine My Investing Success

The challenge is based on absolute return. That means, how well I grow one thousand dollars without comparing myself to how the market is doing. But I’ve mentioned benchmarking performance in the past. I should be comparing myself to how the market is doing, so to track my relative performance, I will be using the S&P 500 for two reasons.

  • It is the index that other bloggers are using.
  • It is a broad market index that is often used as a representation of the markets as a whole.

I currently use Wikinvest to track my personal portfolio. It is a free service that allows you to enter your purchases and they will update you on how your portfolio is doing versus the Dow Jones and the S&P 500.

Want to join?

Would you like to join the challenge? Want some free money?

Use this link to open a Betterment account and get $25 dollars added to your account.

Use this link to open a Loyal3 account and buy shares of companies that you know and love for free.

I’d love to answer any questions you have!

My next post will outline the stocks I choose and my process in picking the stocks. I will also be posting video updates along the way; subscribe to my YouTube channel here to keep up.

Good luck to all of the other challengers!

Could a Blindfolded Monkey — Throwing Darts at Stocks — Beat the Experts? Afford Anything
Grow Your Dough Throwdown: My Investment Picks Working to Live Differently
The Grow Your Dough Throwdown – Investing is Easy Free From Broke
Grow Your Dough Throwdown: My Dividend Portfolio Planting Money Seeds
The Grow Your Dough Throwdown Best Investor Challenge The College Investor
The Grow Your Dough Showdown – My Investment Pick Investor Junkie
The Grow Your Dough Throwdown: My Investments Canadian Finance Blog
Young Finances Joins Investing Challenge Young Finances
My Investment in the Grow Your Dough Throwdown Frugal Rules
Grow Your Dough Throwdown Consumerism Commentary
My Approach to Stock Speculation in 2014 [Grow Your Dough Throwdown Part 1] PT Money

 

Disclaimer

All investing involves risk, past performance is not indicative of future results. There is no guarantee that I will make money. I could lose everything. When mentioning how I plan to invest, it should not be taken as a recommendation or investing advice. You should consult your personal financial advisor to determine what type of investing suits your personal situation and risk tolerance level. There can be substantial risk of loss in trading stocks. You should, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. All transactions in the financial markets are risky. No information I present is intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor.

S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a part of McGraw Hill Financial. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Past performance of an index is not a guarantee of future results.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index.

Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.

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  • jjeffrose

    So glad you’ve enjoyed the challenge. Also love you’re incorporating two strategies so your readers can get a taste for both.

    Can’t wait for it to start! :)

    • http://YoungFinances.com/ LaTisha Styles

      I’m really excited! And I hope this shows how easy it can be to start investing.

  • Pingback: August Investing Challenge Results- Gemini Portfolio()

  • http://www.moneyaftergraduation.com/ Bridget Casey

    um this is so awesome.. but I’m late to the game now and I don’t have any extra cash to throw around (also I don’t think Betterment works in Canada?)

    I JUST opened a margin account so I’ll be using that.. but breaks the rules ;) Maybe next year!

    • http://YoungFinances.com/ LaTisha Styles

      Get ready for 2015! I believe we are going to do a reset of the challenge for next year. :)