Investing for Beginners: Personal Finance

At some point in every Fashionista’s life there comes a time when she should start investing—no, not in fabulous shoes and handbags—but actually investing in something that will build up a nice nest egg. If you’re bracing yourself for some complicated finance talk, don’t worry. Investing can actually be a lot easier than you think.

1. Are you at a point in your life when you should start investing?
If you are in the middle of a huge effort to pay down massive debt, or if you don’t have any money sitting in a savings account at all, this isn’t the time to start investing. Attack your immediate goals so that soon you’ll be ready to start investing.

2. Retirement investing is different from other investments.
You have to keep these two separate. Investing for retirement has different tax considerations, and you shouldn’t think of this money as an accessible safety net because you’ll lose a ton of what you invested if you cash it out before you retire.

3. How do you feel about risk?
Investing can involve some risk. You can put your money into a Certificate of Deposit (CD) and earn a decent return, but unless you’re willing to accept some risk in something like the stock market you aren’t going to earn a bunch of money. The flip side of this, of course, is that you won’t lose money either.

4.Getting started is really easy.
You don’t need to pay a stuffy financial advisor to show you how to invest. There are plenty of great resources online that will tell you everything you need to know, and show you how to get started. Check out Schwab or TD Ameritrade to see how easy it is to open up an investment account. Your bank or credit union probably has mutual funds available too, and this is a great way to begin your investing adventure.

5. Don’t get nutty.
Maybe you’ve never invested before, and you meet someone at a party who swears by investing in the Foreign Currency Exchange (FOREX) or some other complicated venture. Resist the urge to jump into something you don’t really understand, and don’t invest your life savings into something that has a really high risk.

6. Maximize a 401k.
If your employer offers a match of funds for your 401k, go for it. It’s free money. Just make sure your account doesn’t consist solely of company stock—that’s how those Enron folks wound up broke.

Investing isn’t as scary as you might think, and with compound interest you may find that your small monthly contribution to your investment account quickly starts to blossom into an impressive amount. Don’t be intimidated … investing is only scary if you don’t take some time to learn the process.