New here? Just starting as an investor? Begin here…
This web page is for someone visiting Investor Junkie for the first time, but also for the beginning investor.
When I first started investing, the Internet was still in its infancy. Listening to radio programs was one way to get educated about investing. I listened to a guy named Sonny Bloch for awhile, until he went to jail for investment fraud. So, in retrospect, he was not exactly a good role model to take advice from.
At the time, the other resources to increase my investment knowledge were very limited. I didn’t have wealthy friends or family to help guide me along the way. My only option was to read many personal finance books and magazines, and experiment with my own finances.
One of my goals by creating this web site was to help educate others about investing and personal finance. I hope you learn some valuable skills by reading this web site. It’s such a critical skill that affects every part of our daily life.
Let me be your mentor and help you become a better investor and/or entrepreneur. Learn from my successes as well as my mistakes. For each step, I highlight some of my favorite articles.
1. Got Consumer Debt?
One of my primary assumptions is that you’ve eliminated or gotten a handle on your consumer debt. If not, you are more than likely best to find another web site first. Your consumer debt APR in many cases is higher than any return you could get from investing. Try finding a guaranteed rate of return higher than your credit cards. So it’s important to get rid of your 15% APR+ credit card debt ASAP.
I will suggest try using a company like Lending Club, to reduce your debts. Lending Club’s rates are much lower than today’s credit card rates. As an investor of Lending Club notes , I also think it’s a great way of getting out of debt faster.
Though getting rid of debt is pretty easy. Spend less than you earn, and pay down your debts with the difference. Too much debt (what many are seeing in the economy right now) is bad though, especially on assets that decrease in value overtime.
However, I’m not one of those personal finance gurus who will state all debt is bad. I don’t believe you should be debt free. Debt can be an effective tool to leverage investments like real estate and in some cases can include higher education.
So while I commend you in finding out more about investing, you are best to get a handle on your debt first. Read all you want on this web site and get educated about investing, but handle your debts first before you start investing.
If you are one of those individuals who lack self control with your spending habits, you need to really understand why you do this and get it under control. Being wealthy is much more about money. If you don’t have this basic skill under control, then more than likely will be a poor investor as well.
- You’re A Fool To Prepay Your Mortgage
- You’re Still an Idiot Even After College
- Payday Loans VS. Loan Sharks
- The Poor Transfer Wealth to The Rich Via Credit Cards
2. Open A Retirement Account
If you are an employee, run, don’t walk, to your HR department and open up a retirement account with your company. Depending upon the company, it’s either called a 401(k), 403(k) or something similar. These accounts are tax differed and reduce your net income.
This means the money invested is placed into the account before taxes are taken out of it. So it reduces your taxes. When you retire, taxes are paid when you take money out of your retirement account. However, this is a whole other issue and a topic for another day.
At minimum you should be adding to the amount your employeer matches. Not all companies match what you invest. If they do, it’s almost free money and you are a fool if you don’t take it. So if your company matches up to say 3%, it’s like getting an automatic 3% return on your investment.
Not all retirement accounts are created equal though. Some company retirement accounts have limited fund selection or funds with high annual fees. In most cases though you should also open an IRA account to future maximize your tax differed accounts.
- Best IRA Promotions
- Two Ways To Maximize Your Roth IRA Returns
- SEP IRA vs. Individual 401(k)
- Hidden 401(k) Expenses
3. Start Investing and Start Early
If you can afford to, take the maximum amount of your salary and deposit into your retirement account. If you are recent graduate, do this first when you land your first job. With compounding interest, you would be amazed how quickly your money can grow. Even waiting a few years can mean the difference between a difficult retirement and living it up when retired.
To start investing it doesn’t have to be inherently complex. Start off simple with some CDs and index funds. Accept that you might make some mistakes along the way. Realize since you are just starting it’s not a lot of money so it’s less likely you’ll make a big screw up. The important thing is to start investing now!
- There’s No Such Thing as a “Risk Free” Investment.
- How Do You Become A Great Investor? Learn How To Shop!
- How is Investing and Owning a Small Business Related?
- What Is Arbitrage?
- How to Choose an Online Broker
- Which Passive Investment Strategy Is Right For You?
- Best Stock Brokers
4. Asset Allocation
First and foremost, it is critical that you create a proper asset allocation for your investments. Nothing greater will affect your returns than asset allocation. Various asset classes do not move in parallel with each other. This means typically when stock prices rise, bond prices fall. So it’s critical to make sure you have a decent asset allocation for your investment. Not only via different asset classes but also around the world.
Everyone’s situation is different, so you should do some research on what’s the best asset allocation for you and your risk tolerance. Realize the more you are invested in stocks, the more the potential for wide swings in your investments. Do keep in mind if you have 10, 20, 30 or 40 years before retirement you are best to stick with what you’ve decided with your asset allocation.
- Asset Allocation for Retirement
- Asset Allocation for Retirement (The Details)
- Correlation: The Reason For Asset Allocation
- How To Manage Risk? Diversify!
With investing, taxes matter, a lot! You are best to be tax efficient with your investments. This means some investments should be placed in tax differed accounts, while others can remain in taxable accounts.
- How Obamacare Will Affect Investing
- Tax Efficient Investing
- Do You Need Everything in a Tax-Advantaged Account?
- When Should You Hire Someone Else To Do Your Taxes?
- Being “Green” Should Mean A Flat Tax
6. Fund Expenses
Expenses with the funds you own are an often overlooked fee that can dramatically decrease your performance over time. In most cases, you should pick an indexed mutual fund with an annual fee below 1.00%. An annual fee below 0.50% being ideal. One of the lowest funds is Vanguard S&P 500 ETF (VOO), with an annual expense of 0.05%.
Research has shown over a ten year period 80% of actively managed funds (which have higher fees to boot) perform worse than index based funds. Ironically the performance difference typically is the same as the management fees. Meaning fees are a drag on performance, and actively managed funds perform very similar to the mutual funds sector focus.
While index mutual funds are an option, in many cases you can get better results with ETFs. ETFs are typically more tax efficient, lower in annual fees, and can be traded just like a stock. So many investors today pick ETFs over stocks. Though if using ETFs make sure you choose brokers that offer commission free ETFs. The link below has the list of stock brokers with commission free ETFs. The only concern when buying an ETFs is it’s bid/ask ratio. If the ETF isn’t often traded, the bid/ask ratio can be large which be a hidden expense when buying an ETF.
7. Start a Side Hustle
Creating a business in my opinion is one of the best ways to become wealthy. Owning a business gives you so many skills. You’ll deal with issues you normally would not experience when working for someone else. Though the experience won’t be easy, it will be something that will literally expand your horizons. What a better way to learn about finance, business and investing than creating a little petri dish of experiment yourself?
Even if you work full time for another employeer, it’s one of the best experiences that can expand your skill set. There is so much you have to learn when owning your own business. From how to incorporate, balancing the books, developing a business plan, to managing cash flow.
The nice thing while working full-time for someone else, is if the business is a bust you have your job to fall back upon. Though the other reason to start a business is you should start generating multiple streams of income. Should you lose your job, you have something to fall back upon.
The million dollar question of course is: What business should you create? It should be a business in something you enjoy, but also can make money doing. You’ll be surprised of the many business ideas that just started as a goof. See if there are any businesses out there doing what you want to do, and how successful are they? Better yet, even call up and ask the business owner what it is like owning that business. Most business owners would more than want to talk to you about their business.
The business you start could be related to what you do full time currently, or something completely different. That is something totally up to you. If figure out possible business ideas ask yourself: If I didn’t have to worry about money, what business would I like to start?
Since it is a part-time business realize it’s something that should not interrupt your day job. Today it’s very easy to start a part-time business in your home with very little start up costs.
- The Best Business Ideas Are The Simplest
- What Is The Best Small Business Accounting Software?
- Most Personal Finance Blogs Suck!
- Is Buying A Franchise A Good Idea?
- You’re Always Working For “The Man”