Because of the relative complexity of these trades we have created an easy-to-use trade worksheet that subscribers who invest in the Conservative Portfolio can download, print out, and fill in to help them determine how much of their holdings need to be bought and sold to match our post-trade portfolios and to rebalance.

Broadly speaking, there are three asset classes: stocks, bonds, and real estate. Cash, or money market funds, are really just a type of bond – very short term and very safe. While investors can gain access to all three with mutual funds, most own real estate directly. For many, real estate is their biggest, and often their best investment.

There are three main reasons real estate has generally been a successful investment for most people: 1) by buying a home, investors are effectively paying themselves rent 2) a mortgage is essentially a forced savings program paid into each and every month 3) because of the nature of the investment, real estate investors tend to avoid the poor decisions they make when they invest in other major asset classes.

Unfortunately, this last factor may be changing.

Leena from Maine asks:

You’re referring to this article in which we advised Matthew, a young Navy sailor serving in Iraq, to invest in the Vanguard LifeStrategy Growth fund via an auto-investment plan. Matthew was starting out with just $2,000 (while adding $500 per month), and we told him to invest in this single Vanguard fund because it would give him a high degree of diversification (this particular fund is a collection of funds that owns other Vanguard funds) with a low initial investment requirement.

We told Matthew to stick to the Vanguard LifeStrategy Growth fund until he had grown his portfolio to $15k, then to come back to us to discuss where he should go from there. While the fund has risen more than 5% since Matthew asked his question back in November, we’re pretty sure he hasn’t reached the $15k threshold yet – but we’re guessing he wouldn’t mind if we answer your question in the meantime. You are starting out with more money than Matthew, but you are facing similar problems. Every investor, no matter how much money they are starting out with, should aim for certain goals when building an investment portfolio: diversification, low fees, and the right risk level.

One aspect that makes investing so frustrating is the unpredictable pattern stocks follows. The market is like a drunk stumbling home from a bar - you can’t expect a straight path, but you can be reasonably sure of the final destination – home.