Investing for Dummies

amother

Periwinkle

Sun, Jun 19 2022, 12:47 pm

There really is no point in paying someone to "invest" your money unless you have a sizable amount and are looking for advice regarding taxes and diversification and long and short term strategies.

I am not sure this is a fantastic time to invest in the stock market because it is so volatile but theoretically for the person just starting out conventional wisdom is

1) Have an emergency fund in an account that is liquid and not volatile. This generally means just putting the money in a CD or even a bank account because the yield is less significant than returns. Yes we are in an age of inflation but even sophisticated financial analysts aren't making predictions at this point as to whether inflation will continue and/or whether we are headed for a recession and if so how long before recovery.

Conservative advice (and I am a conservative investor) is to keep at least a year's worth of money on hand because you don't know what can happen in a recession. My broker had me do this because instead of reinvesting some stocks I sold, I am must keeping the proceeds parked in a money market account because that way I don't have to liquidate anything if I need money to live on for a year of even a bit longer. And I sold those stocks on the advise of my broker because he thought they were particularly susceptible to current market forces. I was up from the original purchase price but down from their high - but as the saying goes, you can do well in the market as either a bull or a bear but not a pig. Smile

2) If one wants to invest then theoretically you have an Index Fund that is managed by Fidelity or Vanguard. These have low costs and so your net return over a number of years will probably be higher than other investments. This would be for long term investments that you don't need and so you aren't worried about what they might be worth in a year.

It is not wrong to talk to a Financial Advisor but you want one who charges an hourly fee and you don't need to see them frequently. An initial meeting to give you information on how to meet your needs and then perhaps once a year to fine tune things. You would probably benefit from reading one of the good books on investing for beginners even prior to meeting with a Financial Advisor so you can ask intelligent questions as well as evaluate advice you are given.