FPU Session 9: Of Mice and Mutual Funds

This session was all about the basics of investing - diversification, risk, reward, liquidity, compounding interest. The presentation mentioned the range of investment types available: money markets, single stocks, bonds, mutual funds, annuities, real estate and horrible investments (gold, commodities, futures, day trading.)

Typical to all the sessions so far in FPU, Ramsey's number one rule is KISS (keep it simple stupid) and that is why he loves mutual funds. It was obvious that his idea of the best long term investment strategy for the typical middle-income family is a balanced portfolio of mutual funds. I agree. From the KISS perspective one should only invest in something they understand. Mutual funds tend to be the best option for most people.

I did not struggle with the concepts presented in this session. I worked for nearly a decade in the investment and insurance business and this session served as quick refresher for me. I do believe my wife was introduced to some new ideas and I think she was helped by Ramsey's explanations. During the entire hour my mind seemed to focus on what my family is not doing in this area of our financial life and I could feel the anxiety cooking.

At this point my family is not allocating one single dollar to long-term investing. This has really bothered me the last few years. Until I started in FPU, my excuse for not investing was always "We don't make enough money. If we had more income, we could invest like we should be doing." Now, we don't have an excuse, we have a plan. The reason we are not investing is because we are paying off debt. When all our consumer debt is gone at the end of 2010, we'll build up our emergency fund to three to six months of income, and then we'll starting investing. With the plan anxiety is killed and intense focus becomes the strategy. I used to think we needed to be doing both, paying off debt and investing - of course we don't make enough income to do both!

As soon as we get out of debt, we can apply all our monthly debt snowball payments to long-term investing. We need to get out of debt as fast as possible. It's astounding what we can do! I no longer feel defeated by thoughts of what we are not doing.