Getting Started

The toughest thing about investing is getting started. What is an IRA? How do you buy a stock? Where do you buy a stock? How much do you need to get started?

Every person is different in how they start investing and what they invest in, but if you are like I was, you just want to know where to go and aren’t particular about how to start as long as you are getting started.

First thing, if your company offers 401k and you are not enrolled... do it now. Besides the matching that is available from some companies the money is taken out before taxes, lowering the amount that you are taxed on. Next question, what percentage of your salary should you put into your 401k? The minimum that you should put in is whatever percent that your company matches, this money is the closest thing you can get to free money; if your company does not match you should contribute between 6 and 10 percent.

When picking what to invest your 401k in the average person should look at using a life style option. Your 401k will probably have a different name for this, but the jest of it is that you don’t have to pick individual funds to invest in you just pick how aggressively you want your money invested and then the company that controls your 401k will adjust the option periodically, so you don’t have to do anything but let it grow.

Finally starting your individual investments, we'll start with an IRA. If you currently don’t have any money invested (not including a 401k) an IRA is a great place to start. I use TD Waterhouse for my IRAs but you should do some research before you decide which company to use, our Google provided sponsors on the right and bottom should provide a good start to your research. There is no minimum to open an account and in the case of TD Waterhouse you pay a commission for each trade and $25 annually for maintaining the account. There are two types of IRAs that are relevant to us, a Roth or Tradition IRA. If you already have a 401k then you can’t get a Traditional without a penalty, so the Roth is what you want to start with. Future articles will discuss the difference, but for now just stick to Roth.

Once you have decided who you want to use for your Roth or Traditional IRA, you can either start your account on line or go into the office. I suggest going into the office, just because you may have questions and it’s there job to help you get set up. It’s up to you, how much you want to invest and how frequently you want to invest additional money, but if you just don’t know here’s my suggestion; plan on investing $1250 to start this will allow you to buy your first mutual fund, pay the commission and have cash left in the account to pay maintenance fees for several years. Your account set up and money invested, but until you put that money in a mutual fund you won't really be making money on the investment. This is where going into the office to set up the fund will be useful, I’m not going to get into picking funds in this getting started article, but if you are ready to buy your fund just keep in mind that you want an established fund (more than five years old) with returns that are consistently over 10%. The first purchase that I made was Dodge and Cox Stock Fund. To look into that fund go to MSN Money and type DODGX in for the symbol, from there you can also search for other funds that you might want to purchase.

Congratulations you have started investing for your future.

Next article “Purchasing Stocks”