Some quick tips on how to begin your investing career.
Prior to starting to invest:
Write out your goals; what do you wish to accomplish short and long range. Have an emergency reserve equal, at least, to 3 months of essential needs. This can be in cash or an unused home equity line of credit. Make sure all areas of risk have been addressed. These include:
- Loss of income due to disability or death.
- Property and casualty losses.
Now pay yourself first (or maybe second, if the first 10% goes to the Lord). Have 5% – 10% automatically deducted from your salary or from your checking account. Be a LONG TERM INVESTOR, do not try to guess what the stock market or interest rates are going to do, make your decision and stick with it.
Your investments, in the order of importance should be:
A personal residence, this could be your best investment and there are several tax incentives to do it.
Maximize your retirement plans; your employer’s 401k, 403b (TSA), IRA, SIMPLE plan, 457 plan. Remember, in many of these the employer does a match, and since they are usually pretax withheld, your take home does not go down when you put in $100 (take home may only go down $70).
Assuming you have followed the above advice re: goals, risk and emergency reserves, now you can begin your long term investing.
Start a monthly investment program in a ‘no-load’ mutual fund: (Depending on your age and other factors you might consider an aggressive growth or growth fund. And in all cases have some growth in your portfolio to help make up for inflation and taxes.)
Take advantage of your employers stock purchase plans, especially when offered at discounts where you can not lose.
When your portfolio begins to take more time than you have or you are not sure what assets to invest in hire a ‘fee only’ or ‘fee-based’ financial planner.