In investing, you have two basic options: investments where you become a lender to someone and investments where you become an owner of something.

Investments where you lend your money are generally the lower-risk kind. In this category are bank CDs, money-market funds, U.S. Treasury bills, and bonds. Investments where you own something include common stocks, real estate, and precious metals. (The advantage of these "ownership" investments is they have a better long-term record of staying ahead of inflation.)

How you divide your investment capital between these two basic choices of "loaning" or "owning" (in SMI’s strategies, that means between bond mutual funds and stock mutual funds) has a greater impact on your eventual returns than any other single factor.

How do you make that decision? There are two keys. First, you should know your "investing temperament" (are you a "daredevil" or a "preserver" — or somewhere in between?). Second, you should be keenly aware of your "season of life," that is how much time you have remaining to meet your investing goals.

Linked below are articles and resources that will help you make steady progress on this "third level" of Sound Mind Investing.

Read these first

Make Sure Your Investment Decision-Making Is Inside-Out
By Austin Pryor
Your investing decisions should usually be made with little regard for what's going on in the investment markets.

Your Most Important Investing Decision
By Mark Biller
Academic studies have found that as much as 90% of your long-term results can be traced to a single decision.

Resources

The Getting Started pages
Four times a year (February, May, August, November), the print edition of the SMI newsletter features a special section called Fund Performance Rankings. Pages 2 and 3 of this section offer specific instructions on setting up an investing portfolio using simplified versions of either of our two core strategies, Just-the-Basics or Upgrading.

The Getting Started portfolios are for those with less than $25,000 to invest. Like training wheels on a bike, they're helpful to get you up and going. Eventually, and perhaps sooner than you think, you'll outgrow your Getting Started portfolio and graduate to one of our regular model portfolios.

SMI's Investing Temperament Quiz (online interactive version)
Understanding your attitude toward risk is key to establishing a personalized investment plan.

SMI's Seasons of Life Table
The "seasons of life" framework will help you balance your fear of loss against your need for investment growth. The result will be a stock/bond allocation tailored to your personal situation.

Supplemental Articles

Creating Your Own Personal Financial Plan
By Mark Biller
What's the most common mistake people make when managing their finances? Making spending and investment decisions apart from a personalized financial plan.

No Such Thing As "Normal"
By Mark Biller
The stock market produces average returns of about 11% per year. But that impressive overall average hides a lot of volatility along the way.

Don't Look! — Blissful Ignorance Can Be Your Investing Ally
By Mark Biller and Joseph Slife
Being a successful investor over the long haul requires that you protect yourself from your emotions.

How to Implement and Monitor a Dollar-Cost-Averaging Strategy
By Austin Pryor
Dollar-cost-averaging is a strategy that has much to offer the typical investor. It's easy to understand, eliminates timing difficulties, and removes emotions from decision-making.

Getting Started in Index Funds
By Austin Pryor
When it comes to an investing strategy, there's nothing simpler than using index funds. Here are some of the advantages they offer.

• Overview
• Level 1 — Getting Debt-Free
• Level 2 — Saving for Future Needs
• Level 3 — Investing Your Surplus
• Level 4 — Diversifying for Safety