A Quiet Fortune: It’s easy to learn investing basics
Last month I said that index mutual funds are one of the most often recommended ways to go when you’re ready to begin investing. The reasons: 1) they mimic the stock market, which has always risen (even with plenty of downturns) over the years; 2) you can invest in index funds online without difficulty; and 3) their fees are usually minimal, providing higher long-term profits.
Then in my last column I touted the advantages of using a financial adviser: 1) advisers help us set realistic goals; 2) they review clients’ progress regularly and continue to provide guidance during retirement; and 3) they help make sure the barrage of media information does not throw us off course.
So which is best? I’m guessing you already know the answer: it depends on you and your personal circumstances.
If you’re investing on your own you’ll need to be interested enough to learn as much as possible. You’ll have to be able to stay calm during wild swings of the market, because swing it will. You’ll want to keep up with the advice of experts, and you’ll need to review your investments at least once a year. It’s both exciting and challenging.
On the other hand, a financial adviser does much of your work for you. In exchange for that person’s expertise you’ll pay a fee. It’s up to you to decide on an adviser you feel comfortable with, can ask questions of, and trust. Danielle Howard provided a discussion of the fiduciary responsibilities of advisers in her Feb. 27 Post Independent column.
Whichever way you go, however, it’s fascinating to learn about your personal investment options, as well as how quickly your financial security can grow from virtually nothing into something that will soon feel more solid.
Where do you find the necessary information to get you on your way? How do you go about learning this stuff? What, out of hundreds of concepts, should you investigate? It could be overwhelming, but it doesn’t have to be.
One of the best ways to learn is to pick up a book that contains an overall view of personal finance and investment concepts. Even if you don’t read every word you’ll be able to skim through terms in an organized way and look up concepts you haven’t heard of before. Because many personal finance books have a designated path for you to follow, I suggest instead a basic primer for definitions and good explanations. One of those is “Investing 101: From Stocks and Bonds to…” by Michele Cagan CPA.
If you don’t want to start there, begin online. Many independent websites provide basic definitions and suggestions for you. Here are a few that provide useful information: http://www.investopedia.com; http://www.dummies.com; http://www.fool.com; and http://www.SEC.gov. These free sites are easy to search through. You just have to avoid getting distracted by pop-up ads. Other sites such as beta.morningstar.com provide unbiased information but after a free trial will charge for an online subscription. In addition, the websites of investment companies often contain helpful material.
You can also do a Google search for basic investing terms: you’ll get thousands of hits. When you get to a site, just start exploring. If you are reading an explanation that is complicated, convoluted, or a sales pitch, move on. Find articles that make sense to you.
What are some of the terms you’ll want to start with? Basic ones are:
CDs (certificates of deposit), Money Market Accounts, Money Market Funds, 401(k)s, IRAs (individual retirement accounts), Roth IRAs, MyRAs, Mutual Funds, Index Funds, ETFs (exchange-traded funds), Bonds, and Bond Funds.
Sound like a lot? Don’t worry about the whole world of investing. You don’t have to learn everything; you can take months to explore a little at a time. But it’s so true: The more you know, the better off you’ll be.
I invite you to enjoy the ride.
Terrie Drake is a grandmother, the author of the book “A Quiet Fortune,” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at firstname.lastname@example.org.