Beginner investing

If you can do the following things, you can be a successful investor.

1. Find good resources and help
2. Learn something new
3. Set goals and follow through
4. Be patient and use common sense

Women can be great investors if they’re motivated. There’s no magic to investing, but it will take some commitment of time and effort on your part. Don’t worry, you won’t need to learn about the latest investment fads, or spend large amounts of time.

Find good financial resources and help
Start by exploring The Silver Purse and our links page for trusted resources. You can also get informed (and entertained) by good personal finance magazines, such as Kiplinger magazine or Money magazine. Kiplinger.com also has free information on their website. Other good places to read are Bankrate.com and Yahoo.com Finance. Scan personal finance articles, magazines or books regularly to find money-saving ideas or useful investing information.

Find out when it’s important to get help from a financial professional. Choose a CERTIFIED FINANCIAL PLANNER™ practitioner who charges by the hour, or another trusted professional.

Learn something new about personal finance
We suggest at least 20 minutes of reading/learning at least 4 times a month. “Take four for your future” is a good motto to follow. Over a year, you’ll have given yourself a 16 hour “course” and will be that much more informed. It’s your money and your time–make it work towards your goals.

Follow your interests and needs as you learn about investing. Are you faced with selecting a mutual fund for your retirement account at work? Join a shopping trip to learn how mutual funds work. Do you need to set up some savings for emergencies? Perhaps you’re wondering if an IRA would be good for you. Be like a cat and go where your curiosity or need leads you.

Set goals and follow through.
To start with, think about why you want to invest. Are you looking for short-term savings for emergencies, investments that produce regular income now, or a retirement investment for growth?

Most people will need some funds for short term purposes as well as longer term needs. Money needed short-term is usually considered savings. Long-term money goals require investing.

Your first goal is to build some savings for short term and emergency use.
Set up a comfort-cash fund to provide you with some liquid money for those unexpected expenses we all face from time to time.  You should aim for at least $1000, but it’s even better to have 3-6 months of living expenses put aside. Use savings accounts, or money market mutual funds for short term and comfort-cash savings.

The next goal should be to reduce high interest loans, such as credit card debt.
Look at paying some of that off before you put funds into investing. The return you’ll get from paying off debt will be better than what you might get from most investments these days. Most people will save 15-30% interest by paying off credit cards. Paying off debt isn’t very sexy, but it will make you more financially secure and free up funds to put into investing later.

So, that’s it for laying foundations. Now, let’s look at the best place to start investing.

Start by contributing to an employer retirement plan.
This is the first real investment most people should make. Employer “qualified” retirement plans go by names such as 401(k), 403(b), SIMPLE IRA, and pension plans. Your money will grow faster when it’s matched by your employer. It will also grow faster when taxes are deferred, which is why you start here. If you have no employer retirement plan, open a personal IRA if you have earned income.

How should your employer retirement plan be invested? You’ll be limited by the offerings in the plan, but look at growth investments such as stock mutual funds or ETFs if you have at least 10 years to retirement. If you’re the cautious type, you might lean towards a Balanced fund, which will have some bonds in addition to stocks.

Don’t worry too much about choosing the perfect investment. There are many ways to invest that are right over the long term. Just keep opportunity open by choosing investments that provide growth if you have a decade or more until you take the funds out. We’ll cover more details on choosing investments in the next section.

Robin Applegarth CRPC®