What do you need to start fishing?
Photo: Natureworks. Source: Morguefile
Not much: just a hook, a line, and a body of water. And the desire to catch a fish. I remember my 5-year old cousin wiggling her drop-line away from the sunnies approaching her hook, saying “No no fishy, you’re too small.” She was so cute that the adults in the boat barely noticed we were drifting dangerously close to a dam.
As our desires grow, our gear gets more complex. There are different types of rods, reels, and line; boats and boots; electric motors and cruising motors. You may want to consider hiring a guide. All the equipment can seem pretty intimidating. But it’s there so we can catch the kind of fish we want to.
At its heart, though, fishing is simple: get the fish to bite on a hook and pull it in. If you have enough time, you can sit by your favorite fishing hole for hours with nothing but a stick, a line, a bobber, and a baited hook.
It’s that way with investing. If you’re just beginning and don’t have much saved, a basic indexed mutual fund should do. Some only require $1000 as an initial investment. As we accumulate more money, other factors become more important—fees, tax-efficiency, liquidity, tailoring the portfolio to fit our needs. There are lots of reason why a collective fund may be less than ideal.
But it doesn’t take much to get going. As with fishing, the important thing is to start. A trip of a thousand miles begins with a single step.
Douglas R. Tengdin, CFA
Chief Investment Officer