the ladyboss's guide to investing: how to build your investment portfolio

 Photo Credit:  Kaboompics

Photo Credit:  Kaboompics

So I sat down multiple times trying to come up with a witty or engaging story to make starting your investment portfolio seem exciting or enjoyable or <insert fun adjective here>.  But you know what?  I came up blank every time.  To you that might sound depressing and a horrible way to start out this post, but let me finish:  The joy of investing isn’t in investing itself (unless you really like that stuff – hey, nerds).  The joy of investing is what you get at the end, when all is said and done and you have a nice chunk of change with your name written all over it.  It’s that money that’s going to allow you retire early. That money that’s going to allow you to jet off on those amazing scuba diving trips or afford your cooking lessons & season tickets to theater or NFL.  That money that’s going to allow you to chase your passion. 

Do you want to know why I started writing this blog?  So everyone could obtain that.  So every woman could see that she, on her own, could build a great life for herself.  And this is your ticket to doing so.  If this still seems like a chore, that’s ok – we all have chores we have to do every day.  Just don’t make this one the one that you write off because you don’t “want” to do it.  It’ll cost you…and cost you a lot.  So even if this isn’t overly exciting to you, take note anyway.  This is your chance to become a millionaire.

We are going to go through this step by step, but before we start, I just want to remind you all that while I’m a CPA, I am not a financial planner.  And did not become one for a reason.  I get nervous dealing with my own money, let alone let someone else’s future lay in my little hands.  Thus, what I’m laying out for you is my suggestion as to what plan you should follow.  Everyone is different, however, and you have to decide for yourself if you follow my lead or branch out on your own.  I’m not going to suggest certain funds or stocks to invest in, just give you the general game plan you should implement.  Got it?  Alright, let’s proceed.


If your employer offers a 401(k) or similar plan, this is where you need to start.  Before you put your benjamins anywhere else, contribute at least up to the match that your company offers.  For instance, let’s say you make $50,000 at a company that offers a 100% match on any contributions up to 3% of your income.  If you contribute that full 3%, or $1,500, your company will put $1,500 into your retirement account as well.  That’s a 100% return, and I don’t know about you, but if I knew something was automatically going to double my money, I’d invest in it every day of the week. 

Now, let’s say that not only does your company offer a 100% match on up to 3% of your income, they also offer a 50% match on any contributions you make after that up to 5%of your income.  Go for this, too.  At $50,000, you’ll put in another $1,000 and get $500 from your company again.  After one year, not including any gains on your investments themselves, you’ll have made $2,000 off of a $2,500 investment.  Hi, I’d like you to meet No Brainer.

 Annual returns over a 30-year period of someone making $50,000 for 30 years with a company match of 100% up to 3% of income and 50% for the remaining up to 5% of income. Note, by investing just $2,000 more per year, you earn almost $300,000 more for your retirement savings.

Annual returns over a 30-year period of someone making $50,000 for 30 years with a company match of 100% up to 3% of income and 50% for the remaining up to 5% of income. Note, by investing just $2,000 more per year, you earn almost $300,000 more for your retirement savings.

Now, remember, 401(k)s aren’t investments themselves.  They act like a folder that holds your investments, so you still have to choose where your money goes once you put it in that folder.  My suggestion?  If you have less than $10,000 sitting in there, I’d stick to index funds (i.e. anything with “index” or “S&P 500” in the name).  You’ll have lower fees (meaning more of your cash will go straight to investments instead of your fund manager’s pocket), and they normally give you a good (think around 8% annual return on your money.  Just make sure to diversify with these, too – stick a portion in stock index funds, a portion in international index funds, and the remainder in bond index funds (for 20 & 30-somethings, allocate the least – i.e. 20% – to the bond funds!).

If you have more than $10,000 (woohoo, lady!), feel free to branch out.  Each 401(k) plan only offers a select number of investments to choose from, so you’re somewhat limited.   Just do your research and keep it simple:  look for mutual funds with low fees and remember to diversify (across geographies – domestic & international – and sectors – health & tech & finance).  If that still seems overwhelming, many 401(k) providers offer fund “packages” as well, which are basically different funds that they’ve combined based on a person’s risk tolerance, age, etc.  So if you’re younger, they may steer you to a package more heavily invested in stocks.  If you’re nearing retirement age, it’ll be focused on bonds. Your company more than likely has a rep with the firm who runs your 401(k), so feel free to reach out to them for more information about your specific 401(k) plan.

Summary of this section:  Contribute up to your company’s 401(k) match before you do any other retirement investing.  If you have less than $10,000 in your 401(k), stick to index funds.  If you have more, you can branch out a bit. Remember, though to diversify and look for investments within your plan that have low management fees.


Meet one of my many loves of this world:  the Roth IRA.  Investing in a Roth IRA is the next step after you’ve contributed up to your employer’s match in your 401(k) – or your 1st step if you don’t have access to a 401(k).  Why is this next in line?  Because all of the money you earn in this type of account you get to take out after retirement tax free.  Yes, that’s right.  TAX. FREE.  Depending on your tax bracket when you retire, that’s like getting a 25-30% discount right off the bat.  It’s the biggest advantage, but not the only one.  While you can only contribute up to $5,500 per individual per year, you are able to take out any money you put in at any time without any penalties.  With a regular IRA (which is what most 401(k)s are categorized as), you must wait until age 59 ½ before even touching it (or else incur outrageous fees), so the Roth offers a little more liquidity.

Again, a Roth IRA is just like a folder – it holds your investments but isn’t an investment itself.  Just like 401(k)s, if you have a minimal amount in here, invest in index funds.  More than that, you can branch out – and if you don’t know which way to turn at that point, seeking the advice of a financial planner isn’t a bad idea!

You can open a Roth IRA through any brokerage firm, even those online.  My next post will take you step by step on how to do this, so we won’t focus on that here.

Summary of section:  Once you’re done contributing up to your company’s 401(k) match (or if you don’t have a retirement plan sponsored by your employer), invest in a Roth IRA until you hit the $5,500 annual limit.  Less than $10,000 = index funds.  More than $10,000 = Permission to branch out.


After you’ve maxed out your Roth IRA annual contributions, you’ll want to go back to your 401(k) and up your contribution until you reach the max annual amount, which for 2015 is $18,000.  Don’t have a 401(k)?  Then use whatever brokerage is handling your Roth IRA and invest outside of your Roth into individual ETFs or low-fee mutual funds.  For those of you that want to take a simple approach, go with index funds like I mentioned before – they follow the market and earn a fair return (Vanguard’s 500 index earned an 8% annual return over a 10 year period).

The benefit of having that 401(k) is that you are only taxed once on your money – either when you put it in (Roth 401(k)) or take it out (traditional 401(k)).  Investing outside of an investment vehicle like an IRA or 401(k) means that you are taxed twice – once through your paycheck before you use that money to invest and then again on whatever earnings you have after you cash out that investment.  Bummer, I know – welcome to America.  Someone has to fund all those drones.

Summary of section:  After hitting the match on your 401(k) and the annual contribution limit on your Roth IRA, go back to your 401(k) and up your contribution until you hit the $18,000 annual limit.  If you don’t have a 401(k), invest in ETFs or low-fee mutual funds in a regular brokerage account (i.e. TD Ameritrade, Merrill Lynch, etc.).

There you have it, ladies!  The low-down on where you should be putting your hard-earned moolah.  I know you still may be feeling like you don’t know where to turn, but read over it again (and maybe a third time), let it sink in, and ask me any (ANY) questions you have.  My next post will be focusing on how to open your own Roth IRA in a TD Ameritrade account, so make sure to watch for it.  It’ll be a big step in building your retirement heaven!

 Photo Credit: Sebastian Mantel

Photo Credit: Sebastian Mantel