7 Investing Tips for Financial Rookies

Whether you’re a novice when it comes to investing or a self-styled Gordon Gekko, you should familiarize yourself with the basics of investing. In an ever changing and volatile global economy, a little knowledge, just like a little bit of money, can go a long way. The following seven tips will help you get started as an investor regardless of what school you go to: Rasmussen College, Norwich University, Keiser University, George Washington University, Virginia College, Grand Canyon University, whether you have $20 or $20,000.

  1. Pay off high interest debt:

    The No. 1 thing to do before you invest any amount of money is to pay off your high-interest rate debt, money owed on credit card and department store charge accounts. If you’re having trouble paying off a credit card you maxed out for whatever reason, or are one or two months behind in paying your student loans, you should hold off on investing until you get your debt under control. You should also have a three- to six-month emergency fund in place before investing.

  2. Savings accounts:

    Making a monthly deposit into an interest-generating, no-fee savings account may not sound as glamorous as screaming “Sell! Sell! Sell! Buy! Buy! Buy!” into a cell phone, but for a highly liquid (meaning, you can access the money anytime with no penalty) and low risk investment, you really can’t beat a savings account. Emigrant Savings Bank offers a free online savings account with no fees, no minimum balance requirement, and interest that compounds daily and credits to your account monthly.

  3. Dollar cost averaging:

    Using the long-term strategy of dollar cost averaging means putting the same amount of money each month into a single investment vehicle, such as your employer’s 401k or 403b plan. Over the years, as the value of your investments go up and down with the market, you’re able to get more bang for your buck since you can purchase even more shares with your steady contribution when prices are down. Since you were able to “buy low,” you’ll see a bigger return on your investment when the market is doing well.

  4. Diversify:

    Would you seriously consider putting every cent of your net worth into a single stock? Well, unless like Bono, you got in on Facebook back in the day before it went public, chances are your one stock ain’t gonna do that well. It may even tank. To be diversified simply means you’re invested in a variety of vehicles, some risky, some not so risky, so you don’t have all of your eggs in one basket.

  5. Mutual funds:

    A mutual fund uses the money from several hundred investors to pay a fund manager and a team of analysts to create a portfolio of stocks, bonds, real estate, or other securities. Each individual investor reaps the benefits of the total value of the fund. Unlike mutual funds, index funds come with no management fees or require that you pay taxes on any capital gains. If you’re looking for a greater return on your investment, and do not have the time to actively and closely monitor your fund, then consider investing in an index fund.

  6. Target retirement funds:

    Target retirement funds combine index funds with a target date fund to create a “hands off” investment package, with allocations and investments that are initially aggressive but gradually, as you get closer to retirement, become more conservative. Investors easily select a target retirement fund based on their current age. The funds are a broadly diversified combination of stocks and bonds, and come with very low annual expenses.

  7. Find a financial advisor:

    Ultimately, you should be the one to make any and all final decisions regarding your money, but in order to do so, you will most likely need some professional guidance from a financial advisor. You can gain helpful financial advice from a tax accountant, banker, insurance agent, registered investment advisor, financial coach, and/or a financial planner, and advice from these different kinds of advisors will certainly overlap. Take care to vet and question anyone that’s giving you advice, especially if they are receiving a fee for doing so. For free face-to-face advice regarding investing, consider starting with your local bank.