How to start investing
December 18, 2006 8:34 AM Subscribe
Looking for good information (ie. a book, not a basic article) on how to start investing a little bit of money every month.
I am a 22 year old college student switching between part time and full time work. I have a little extra income that I would like to start investing for multiple reasons: 1. As a design student I know absolutely nothing about investing and have no opportunity to learn about that in any of my classes. 2. I think it will help me to stop partying like a rock star on the weekends if I make it a point to set aside some money for later.
I can only set aside $50-$100 a month and would be starting off with that sum. I have read a lot about investing on the internet and it really does not take in to account that I know NOTHING about the subject. I would prefer to be knowledgeable about where to put my money so I don't want to hear "go to a bank and they will take care of it for you." I am not looking for financial advice just a direction to start research about what I can do NOW to start saving for later.
Yes I know there is an absurd amount of information out there on investing, but that is why I am asking for your personal experience/recommendations and not just a link to a book you found on amazon.com Thanks!
I am a 22 year old college student switching between part time and full time work. I have a little extra income that I would like to start investing for multiple reasons: 1. As a design student I know absolutely nothing about investing and have no opportunity to learn about that in any of my classes. 2. I think it will help me to stop partying like a rock star on the weekends if I make it a point to set aside some money for later.
I can only set aside $50-$100 a month and would be starting off with that sum. I have read a lot about investing on the internet and it really does not take in to account that I know NOTHING about the subject. I would prefer to be knowledgeable about where to put my money so I don't want to hear "go to a bank and they will take care of it for you." I am not looking for financial advice just a direction to start research about what I can do NOW to start saving for later.
Yes I know there is an absurd amount of information out there on investing, but that is why I am asking for your personal experience/recommendations and not just a link to a book you found on amazon.com Thanks!
Good for you! I am by no means an investment expert. But I think the place to start is by asking yourself a couple questions:
1. Are you investing to make money to use in the short term (e.g. to buy a car), the medium term (e.g. to put a down payment on a house), or the long-term (e.g. for retirement or the eventual education of your eventual children)?
2. Are you more interested in steady, small gains with little or no risk, or are you more interested in potentially higher gains and willing to accept the higher risk that comes with that potential? (Another way to look at it is this: If you set aside $1200 in a year, would you rather have a virtual guarantee on $1240 at the end of the year, or are you comfortable with the idea that you could have as much as $1600 and as little as $600?)
posted by j-dawg at 8:52 AM on December 18, 2006
1. Are you investing to make money to use in the short term (e.g. to buy a car), the medium term (e.g. to put a down payment on a house), or the long-term (e.g. for retirement or the eventual education of your eventual children)?
2. Are you more interested in steady, small gains with little or no risk, or are you more interested in potentially higher gains and willing to accept the higher risk that comes with that potential? (Another way to look at it is this: If you set aside $1200 in a year, would you rather have a virtual guarantee on $1240 at the end of the year, or are you comfortable with the idea that you could have as much as $1600 and as little as $600?)
posted by j-dawg at 8:52 AM on December 18, 2006
Here is my number one, super top secret, most successful money saver advice EVAR:
1) Open up a savings account at a bank that is not your bank. (I suggest a credit union if you're not already a member so that you can lock in on good loan/mortgage rates if and when the opportunity arises, but any bank will do.)
2) Do not get an ATM card for the savings account.
3) Setup an automatic deposit or transfer into the account for 10% of your incoming funds (after taxes*).
4) When the amount reaches whatever amount you deem "I need the cash TODAY" emergency cash, open up an account at an internet bank like Emigrant Direct or ING. And transfer everything on top of that into a high yield savings account.
* Make sure to adjust your withholding so that you are not giving the gov't what you could be saving/making interest on.
posted by 10ch at 9:05 AM on December 18, 2006
1) Open up a savings account at a bank that is not your bank. (I suggest a credit union if you're not already a member so that you can lock in on good loan/mortgage rates if and when the opportunity arises, but any bank will do.)
2) Do not get an ATM card for the savings account.
3) Setup an automatic deposit or transfer into the account for 10% of your incoming funds (after taxes*).
4) When the amount reaches whatever amount you deem "I need the cash TODAY" emergency cash, open up an account at an internet bank like Emigrant Direct or ING. And transfer everything on top of that into a high yield savings account.
* Make sure to adjust your withholding so that you are not giving the gov't what you could be saving/making interest on.
posted by 10ch at 9:05 AM on December 18, 2006
I came across Kiplinger's Success With Your Money magazine last time I went to the book store. It seems like a good place to start. It may be a little high level, but it is targeted to a younger audience.
posted by bwilms at 9:21 AM on December 18, 2006
posted by bwilms at 9:21 AM on December 18, 2006
You probably don't need a book at this point. If your company offers a 401k with matching, fund that up to the lessor or your ability to comfortably contribute or the point at which the company no longer matches.
Beyond that, I'm assuming you don't have a few grand sitting around waiting to fund your investments, right? Set up a savings account. One of the online only, high interest rate accounts would be best. Set up an automatic transfer of $50 or $100 or whatever amount you feel like you can manage.
Don't touch it. Let automatic contributions start to work their magic.
When the account gets to 3 months of your living expenses plus about $1,000-$3,000, take the extra amount that is beyond your living expenses, and set up an index mutual fund like Vanguard's S&P 500 or Total Stock Market account. Other companies have similar index funds. I'm just mentioning the ones I'm familiar with.
Set up another automatic contribution to that account. You can take some of what you were putting into savings, or by now you might have received a raise and/or gotten used to not having the money, so you can actually start contributing a bit more.
Keep funding the savings account too if you can. The extra money you put in there beyond a few months living expenses can now be your take a trip or buy yourself something cool fund.
That's about all you need to know right now. Good luck, and good for you for thinking about your future.
posted by willnot at 9:22 AM on December 18, 2006 [1 favorite]
Beyond that, I'm assuming you don't have a few grand sitting around waiting to fund your investments, right? Set up a savings account. One of the online only, high interest rate accounts would be best. Set up an automatic transfer of $50 or $100 or whatever amount you feel like you can manage.
Don't touch it. Let automatic contributions start to work their magic.
When the account gets to 3 months of your living expenses plus about $1,000-$3,000, take the extra amount that is beyond your living expenses, and set up an index mutual fund like Vanguard's S&P 500 or Total Stock Market account. Other companies have similar index funds. I'm just mentioning the ones I'm familiar with.
Set up another automatic contribution to that account. You can take some of what you were putting into savings, or by now you might have received a raise and/or gotten used to not having the money, so you can actually start contributing a bit more.
Keep funding the savings account too if you can. The extra money you put in there beyond a few months living expenses can now be your take a trip or buy yourself something cool fund.
That's about all you need to know right now. Good luck, and good for you for thinking about your future.
posted by willnot at 9:22 AM on December 18, 2006 [1 favorite]
Get a Financial Life: Personal Finance in Your Twenties and Thirties
posted by kirkaracha at 9:30 AM on December 18, 2006
posted by kirkaracha at 9:30 AM on December 18, 2006
If you want to read a good book on investing I recommend "The Intelligent Investor" by Benjamin Graham. This will tell you such fundamentals as why you are probably not going to get rich by being a part time day trader and what the difference between investment and speculation is. This is all stuff that you are unlikely to get explained to you by those trying to sell you a financial product and it was all useful news to me. It is a classic book from the 70s given a fine post dot com bubble update.
posted by rongorongo at 9:40 AM on December 18, 2006
posted by rongorongo at 9:40 AM on December 18, 2006
I second the recommendation for Get a Financial Life. I bought the book back when i first got my first real job with real paycheck. It's an excellent starter book, giving you good basic information (even how long to hold on to what kind of financial documents!) and pointing you to more detailed sources if you want to find out more.
posted by needled at 9:46 AM on December 18, 2006
posted by needled at 9:46 AM on December 18, 2006
I second the Suze Orman recommendation. A lot of finance stuff went in one ear and out the other for me until I started watching her show. She takes nothing for granted and starts out with the basics for everyone, unlike so many other finance gurus who seem to approach things from the perspective of Improving One's Existing Portfolio. And she doesn't assume that your primary goals are prepping for a looming retirement and paying for your kids' education.
You might want to look at her Money Book for the Young, Fabulous and Broke as a starting point. You can move on to more "serious" investment recommendations later. But get cracking now, compound interest is your BEST FRIEND when you're only 22!
posted by bcwinters at 9:59 AM on December 18, 2006
You might want to look at her Money Book for the Young, Fabulous and Broke as a starting point. You can move on to more "serious" investment recommendations later. But get cracking now, compound interest is your BEST FRIEND when you're only 22!
posted by bcwinters at 9:59 AM on December 18, 2006
there is no magic bible to successful investing, you're looking for something that doesn't exist. even relatively knowledgeable players make spectacularly wrong guesses. i sure have.
the cornerstone of financial security is owning your own home, and the current easing in the real estate market will afford you an opportunity to do that.
imho, the dollar is about to get whacked due to our huge budget and trade deficits. if i am right, you should be in real, tangible assets, not fiat money instruments. real estate, precious metals, energy. oil has eased quite a bit, but it will roar back after either the u.s. or israel attacks iran. the u.s. oil fund (trading symbol "uso") is an oil etf, each share represents a barrel of oil in the futures market, you might want to look at it.
posted by bruce at 9:59 AM on December 18, 2006
the cornerstone of financial security is owning your own home, and the current easing in the real estate market will afford you an opportunity to do that.
imho, the dollar is about to get whacked due to our huge budget and trade deficits. if i am right, you should be in real, tangible assets, not fiat money instruments. real estate, precious metals, energy. oil has eased quite a bit, but it will roar back after either the u.s. or israel attacks iran. the u.s. oil fund (trading symbol "uso") is an oil etf, each share represents a barrel of oil in the futures market, you might want to look at it.
posted by bruce at 9:59 AM on December 18, 2006
Another blog you might want to look at is Get Rich Slowly.
They had a post called How Compound Interest Favors the Young a few months ago with a simple little Excel spreadsheet to fiddle with. Seeing $100-a-month turn into a million bucks by age 65 is a nice motivator.
posted by bcwinters at 10:52 AM on December 18, 2006
They had a post called How Compound Interest Favors the Young a few months ago with a simple little Excel spreadsheet to fiddle with. Seeing $100-a-month turn into a million bucks by age 65 is a nice motivator.
posted by bcwinters at 10:52 AM on December 18, 2006
willnot's advice is really strong, and I'll second bcwinters' suggestion of Get Rich Slowly. It's written by mefite jdroth.
One index fund you might want to think about is one of Vanguard's age-specific funds. As you do your research, you'll see that there are "aggressive," "moderate," and "conservative" funds. Essentially, the longer your time frame (yours is long) between now and retirement, the more risk you can afford. The age-specific funds automatically move you from more aggressive (now) to moderate (as you get older) to conservative (as you near retirement).
posted by Alt F4 at 11:39 AM on December 18, 2006
One index fund you might want to think about is one of Vanguard's age-specific funds. As you do your research, you'll see that there are "aggressive," "moderate," and "conservative" funds. Essentially, the longer your time frame (yours is long) between now and retirement, the more risk you can afford. The age-specific funds automatically move you from more aggressive (now) to moderate (as you get older) to conservative (as you near retirement).
posted by Alt F4 at 11:39 AM on December 18, 2006
Andrew Tobias, The Only Investment Guide You'll Ever Need. Highly recommended.
posted by russilwvong at 10:33 PM on December 18, 2006
posted by russilwvong at 10:33 PM on December 18, 2006
Cocurring with willnot that the first thing you should do with extra money is to build up a nice chunck of change in your savings account. The one to three months is recommended by most folks in this field. Its really the way to start investing. It is the greatest gift you can give yourself and you will know what I mean when the day comes that you need it. It gives you more emotional and psychological freedom than I can express. But I am also of the school of thought that you should pay off your debt before you really invest. So take it or leave it.
You can't go wrong with the blogs and books mentioned above. The ones I've learned from, or had the message hammered home by, that are not listed above:
Your Money or Your Life and anything by Dave Ramsey (though he can be pretty opinionated on things outside of your budget and comes off as harsh, his fundamental message is an elaboration of willnot). They are more about managing money on the whole than straight investing, but I mention it because it echoes what I said above.
As far as learning investing, one blog that has not been mentioned yet is Phil Town which gives a simplified spin-off of the Graham>>Buffett theory. But when reading him you must keep in mind that there are no short-cuts to such methods.
Good Luck!
posted by iurodivii at 4:31 AM on December 19, 2006
You can't go wrong with the blogs and books mentioned above. The ones I've learned from, or had the message hammered home by, that are not listed above:
Your Money or Your Life and anything by Dave Ramsey (though he can be pretty opinionated on things outside of your budget and comes off as harsh, his fundamental message is an elaboration of willnot). They are more about managing money on the whole than straight investing, but I mention it because it echoes what I said above.
As far as learning investing, one blog that has not been mentioned yet is Phil Town which gives a simplified spin-off of the Graham>>Buffett theory. But when reading him you must keep in mind that there are no short-cuts to such methods.
Good Luck!
posted by iurodivii at 4:31 AM on December 19, 2006
Not sure what happened above:
Dave Ramsey
Phil Town
posted by iurodivii at 4:32 AM on December 19, 2006
Dave Ramsey
Phil Town
posted by iurodivii at 4:32 AM on December 19, 2006
Two investment brokerages (stocks, bonds, not for the mutual funds) that specialize in this kind of long term thinking / investing strategy: Sharebuilder and BuyAndHold.com. Both are $3/$4 per trade, but the trick is that the trades are executed at the nearest trade "window" (10, 12, 1:30 or some such). This means that you can't use them for daytrading but they're great for regular (weekly, monthly) investments.
posted by zpousman at 7:30 AM on December 19, 2006
posted by zpousman at 7:30 AM on December 19, 2006
I wish I had time to write a longer response. I haven't written as much at Get Rich Slowly about investing as I would like. I hope to remedy that in the future. Based on your questions, I'd suggest both Bach's Automatic Millionaire (which is about making it easy to invest $50 or $100 or whatever each month) and Tobias' Only Investment Guide.... Both offer good infromation.
The best advice I can offer is: Just do it. Just start. Don't worry about making perfect choices. Just start investing. You'll have time to make corrections later. The most important thing is to start now and to make it a habit. As spousman says, Sharebuilder makes this easy.
Good luck!
posted by jdroth at 5:30 PM on December 21, 2006
The best advice I can offer is: Just do it. Just start. Don't worry about making perfect choices. Just start investing. You'll have time to make corrections later. The most important thing is to start now and to make it a habit. As spousman says, Sharebuilder makes this easy.
Good luck!
posted by jdroth at 5:30 PM on December 21, 2006
This thread is closed to new comments.
I have never read a book on the subject, but the biggest thing is just to get set up, and keep putting money in. You just decide what you are investing for (retirement, house, kids...), and then pick the appropriate type of account, then pick the appropriate risk of investment. Then you just keep putting money in.
Sorry I can't suggest a book, but great job starting to save some money.
posted by cschneid at 8:43 AM on December 18, 2006