Getting Started with Investing
What do I need to do before I can invest?
Buy a book about investing. Seriously, buy a book! Educating yourself will be the best investment you can make. $100 is not enough to get started in the market. Broker fees, taxes and other expenses will eat up that $100 before you can do anything with it.
I have some money I want to invest, but I need it back within a short period of time (less than a few years). How should I invest it?
Do not put money into the stock market that you need back in a short time period. The only safe places for that money are a savings account or cash equivalents (such as a money market account).
We realize you'd like more return than what your savings account will be paying, but if you need the return of principal, you cannot risk it in the stock market over such a short time horizon.
OK, now I have [$XX,XXX], how should I invest it?
How old are you? What are your objectives? What is your risk tolerance? What is your time horizon? Do you need this money for anything any time soon? (Eg home purchase, kids, car, school) Are you interested in a passive, long-term approach ('set and forget') or a more active day-trading strategy?
As you can see, there are a lot of questions that need to addressed before a suitable answer can be given. If you have an expense or a purchase you are making soon (house, car, University fees), it is inadvisable to be putting your money into risky assets like stocks. If you want a set-and-forget solution, a simple set of indexed mutual funds in a lazy portfolio might be your best bet.
How much time does investing take?
As you learn about investing, you'll see there are different style types. Some of them take many hours per week for those who choose to go this route; others take mere minutes per month. In addition to the risk factor of your portfolio, you'll have to decide how much time you want to put into your investing, and make that part of your decision.
I want to invest, but the market is at an all-time high. Should I wait?
Let's ignore for the moment whether the market is, in fact, at an all-time high. Time in the market generally beats timing the market, and if you're asking this question, you almost certainly don't know enough about the market to time it (don't worry - neither do most people). If you're planning to buy-and-hold, now is the time to do it.
As always make your decision wisely, investing needs to be calculated risk.
Cheers
DanKind Regards R
What do I need to do before I can invest?
- First, you must keep an emergency fund. There are exceptions, but only one applies at the beginning - getting an employer plan (such as a 401(k)) match. This doesn't necessarily apply if your emergency fund is particularly low.
- Next, you must know what you're investing in. Take the time to do some reading.
- Then you must make an informed decision about what kind of investing you are interested in - whether you are going to pick stocks, go with an investment manager (either directly or through a mutual fund), or be an index investor. Each has different upsides and downsides (FAQ section on the differences forthcoming! -ari)
- The next step is to determine your goal. An investment that would be fantastic for a twenty five year old earmarking some money for retirement would be terrible for someone who aims to save for a new car in five years.
- You must (of course) have the money to invest.
Buy a book about investing. Seriously, buy a book! Educating yourself will be the best investment you can make. $100 is not enough to get started in the market. Broker fees, taxes and other expenses will eat up that $100 before you can do anything with it.
I have some money I want to invest, but I need it back within a short period of time (less than a few years). How should I invest it?
Do not put money into the stock market that you need back in a short time period. The only safe places for that money are a savings account or cash equivalents (such as a money market account).
We realize you'd like more return than what your savings account will be paying, but if you need the return of principal, you cannot risk it in the stock market over such a short time horizon.
OK, now I have [$XX,XXX], how should I invest it?
- Consider how much you have and
- No matter what, keep an emergency fund
- If this is for the long haul, here is a start-up kit
- Also note the advantages/disadvantages of different retirement account types: http://en.wikipedia.org/wiki/401%28k%29_IRA_matrix
- Still have questions? Great! But before anyone here can give you a helpful answer, we need to know more.
How old are you? What are your objectives? What is your risk tolerance? What is your time horizon? Do you need this money for anything any time soon? (Eg home purchase, kids, car, school) Are you interested in a passive, long-term approach ('set and forget') or a more active day-trading strategy?
As you can see, there are a lot of questions that need to addressed before a suitable answer can be given. If you have an expense or a purchase you are making soon (house, car, University fees), it is inadvisable to be putting your money into risky assets like stocks. If you want a set-and-forget solution, a simple set of indexed mutual funds in a lazy portfolio might be your best bet.
How much time does investing take?
As you learn about investing, you'll see there are different style types. Some of them take many hours per week for those who choose to go this route; others take mere minutes per month. In addition to the risk factor of your portfolio, you'll have to decide how much time you want to put into your investing, and make that part of your decision.
I want to invest, but the market is at an all-time high. Should I wait?
Let's ignore for the moment whether the market is, in fact, at an all-time high. Time in the market generally beats timing the market, and if you're asking this question, you almost certainly don't know enough about the market to time it (don't worry - neither do most people). If you're planning to buy-and-hold, now is the time to do it.
As always make your decision wisely, investing needs to be calculated risk.
Cheers
DanKind Regards R