Investing 101
July 5, 2023 1:29 PM Subscribe
What is a good, basic investing overview for a young person who now has a little money saved and looking to invest but does not understand the market / the difference between equities, money markets, indexed funds, bonds, etc nor brokers vs advisors vs fiduciaries. Video prolly ideal (e.g., young person)
No help on a video, but if they're ever in doubt about specific issues or terms...appending "investopedia" to any internet search will yield a quick answer.
If they're not too interested in learning the basics of investment (not everyone is) and just need actionable advice? I'd start by walking them through how to open a Roth IRA account, and then tell them to invest in an index fund.
posted by desert outpost at 2:30 PM on July 5, 2023 [1 favorite]
If they're not too interested in learning the basics of investment (not everyone is) and just need actionable advice? I'd start by walking them through how to open a Roth IRA account, and then tell them to invest in an index fund.
posted by desert outpost at 2:30 PM on July 5, 2023 [1 favorite]
The Financial Diet has great, free videos and also links to people who teach classes on this very topic!
posted by smorgasbord at 2:34 PM on July 5, 2023
posted by smorgasbord at 2:34 PM on July 5, 2023
William J Bernstein's "If You Can - How Millennials Can Get Rich Slowly" (PDF link from author's website - it's a 16 page free booklet)
For more detail, bogleheads.
posted by are-coral-made at 2:40 PM on July 5, 2023 [6 favorites]
For more detail, bogleheads.
posted by are-coral-made at 2:40 PM on July 5, 2023 [6 favorites]
One point about "the index card of money rules". When they say "Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds", don't buy target date funds outside of a 401(k) or IRA.
Fund managers will operate as though those funds are in tax-advantaged accounts (because that's what they're for!), which can lead to surprise tax bills when they rebalance, if you're holding them in a taxable account.
posted by Blue Jello Elf at 2:52 PM on July 5, 2023 [5 favorites]
Fund managers will operate as though those funds are in tax-advantaged accounts (because that's what they're for!), which can lead to surprise tax bills when they rebalance, if you're holding them in a taxable account.
posted by Blue Jello Elf at 2:52 PM on July 5, 2023 [5 favorites]
If I had to point ANYONE to ANY video offering advice on investing, it would be this one: J.L. Collins speaking at Google. It's not flashy. It's not exciting. But J.L.'s voice is soothing and his advice is 100% rock solid. I've been writing about money since 2006. I've learned a lot since then. This video is exactly (better, actually) what I'd suggest to somebody looking to invest.
posted by jdroth at 3:31 PM on July 5, 2023 [6 favorites]
posted by jdroth at 3:31 PM on July 5, 2023 [6 favorites]
Fidelity's mini-site Teaching Teens About Money has a number of topics, and the general Learning Center page has some "Get Started" videos. There's also a guide for how you can direct some of the learning: Investing Tips - Introducing Your Teen to Investing. (Full disclosure: I used to work at Fidelity.)
NPR's Teen Money Matters podcast covers a range of topics, some focused on investing.
There are a lot of finance podcasts aimed at young/new investors. A word of caution that many of these make their money through affiliate links for listeners to open investment accounts at untested investment brokers. For instance, Teen Financial Freedom has some good content, but there's a lot of FIRE movement content and bro-ish attitude, along with "deals" on opening investment accounts. For someone without a a track record of financial discipline, it can be easy to follow these links and offers and end up with an empty wallet. Also note that many of these podcast hosts are just random people talking about what worked for them, and it can be hard for a novice investor to hear through that hype to understand the full picture of gains and losses (i.e., PPINGOFR...past performance is no guarantee of future results).
Stock market simulators ("fantasy investing") like Wall Street Survivor let you learn the ropes and make different kinds of trades without using real money. The interface is over-complicated and overly focused on "winning" vs. learning and understanding, in my opinion, but if your person is the right age and motivation, it can be fun.
I understand (and agree with) recommendations up-thread about a set-it-and-forget-it approach with low/no-cost index funds, but those don't really help you learn about investing. There's nothing like watching a stock you bought rise and fall to reveal your actual understanding and human impulses. Once your person is at a certain level of understanding, a little bit of actual money in the market can solidify theory into reality.
And now I'm going to watch jdroth's recommended video.
posted by cocoagirl at 3:56 PM on July 5, 2023
NPR's Teen Money Matters podcast covers a range of topics, some focused on investing.
There are a lot of finance podcasts aimed at young/new investors. A word of caution that many of these make their money through affiliate links for listeners to open investment accounts at untested investment brokers. For instance, Teen Financial Freedom has some good content, but there's a lot of FIRE movement content and bro-ish attitude, along with "deals" on opening investment accounts. For someone without a a track record of financial discipline, it can be easy to follow these links and offers and end up with an empty wallet. Also note that many of these podcast hosts are just random people talking about what worked for them, and it can be hard for a novice investor to hear through that hype to understand the full picture of gains and losses (i.e., PPINGOFR...past performance is no guarantee of future results).
Stock market simulators ("fantasy investing") like Wall Street Survivor let you learn the ropes and make different kinds of trades without using real money. The interface is over-complicated and overly focused on "winning" vs. learning and understanding, in my opinion, but if your person is the right age and motivation, it can be fun.
I understand (and agree with) recommendations up-thread about a set-it-and-forget-it approach with low/no-cost index funds, but those don't really help you learn about investing. There's nothing like watching a stock you bought rise and fall to reveal your actual understanding and human impulses. Once your person is at a certain level of understanding, a little bit of actual money in the market can solidify theory into reality.
And now I'm going to watch jdroth's recommended video.
posted by cocoagirl at 3:56 PM on July 5, 2023
Fully fund any retirement accounts you may have/get.
Anything left? Monthly fixed dollar investment in an index fund. Or any no-cost mutual fund. Doesn't have to be a lot, but if you have a spare $100 bucks each month, go for that.
And, live within or below your means. Make sure you have that spare $100 bucks each month. Time, and interest, is a pretty good thing.
posted by Windopaene at 4:08 PM on July 5, 2023
Anything left? Monthly fixed dollar investment in an index fund. Or any no-cost mutual fund. Doesn't have to be a lot, but if you have a spare $100 bucks each month, go for that.
And, live within or below your means. Make sure you have that spare $100 bucks each month. Time, and interest, is a pretty good thing.
posted by Windopaene at 4:08 PM on July 5, 2023
Personal Finance for Dummies is actually a quite good place to start.
—
When I was in my mid 20s, a friend of mine’s father told me that if he had to do it all over again he would’ve just put his money in an index fund and forgotten about it. Now I, roughly the same age, am saying the same thing to you. It probably won’t make a difference, like us you will need to go through the experience of trying out different investments and playing around, but perhaps when you reach your 50s you can pass along the advice to the next generation.
posted by Tell Me No Lies at 9:04 PM on July 5, 2023 [2 favorites]
—
When I was in my mid 20s, a friend of mine’s father told me that if he had to do it all over again he would’ve just put his money in an index fund and forgotten about it. Now I, roughly the same age, am saying the same thing to you. It probably won’t make a difference, like us you will need to go through the experience of trying out different investments and playing around, but perhaps when you reach your 50s you can pass along the advice to the next generation.
posted by Tell Me No Lies at 9:04 PM on July 5, 2023 [2 favorites]
Oh, and the absolute first rule: if a person could actually make reliable predictions about the markets, they would certainly not be spending their life writing a book or making videos or being a money manager.
posted by Tell Me No Lies at 9:08 PM on July 5, 2023
posted by Tell Me No Lies at 9:08 PM on July 5, 2023
My only extra advice would be to not get to caught up in the perfect details and do it as soon as possible, and to set realistic expectations. You have to invest about $40k a year for about 20 years to get to $1million dollars. So will you get there with just a IRA, which has limits of ~$6,000 a year? Yes, but it will take even longer.
So notice the timescale of investing is long, ie: who cares about 5-10 years performance, so because ones time on earth is limited, and one normally can't invest when you are 1 year old, you have to invest as soon as you are able and continue doing it for a long time.
posted by The_Vegetables at 7:31 AM on July 6, 2023 [1 favorite]
So notice the timescale of investing is long, ie: who cares about 5-10 years performance, so because ones time on earth is limited, and one normally can't invest when you are 1 year old, you have to invest as soon as you are able and continue doing it for a long time.
posted by The_Vegetables at 7:31 AM on July 6, 2023 [1 favorite]
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posted by foxfirefey at 1:40 PM on July 5, 2023 [3 favorites]