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Investing for Beginners – Getting Started


Welcome to the complex and exciting world of investing. The purpose of this introduction is to provide a “how-to” for (mostly young) people who have never invested in the stock and bond markets. Van Wie Financial has 2 goals – protecting novice investors from unscrupulous brokers and insurance salespeople, and maximizing beginners’ probabilities for long-term success. After all, the goal of investors is to achieve long-term Financial Independence.

Creating simplicity from the complex is never easy, nor could it ever be complete. However, our “getting started” outline should give the novice a framework for laying the cornerstone of a lifetime plan. Let’s get started, from absolute scratch.

•    Start saving and investing young; start today if possible.

•    The first step is to accumulate a “Rainy Day Fund” of at least $5,000 for people ages 30 and under, and $10,000 for those over 30, in a credit union or bank.

•    Once that has been accomplished, open an investment account.

•    Investment account types include Traditional IRA, Roth IRA, 401(k), 403(b), Brokerage Account, and a few others.

•    The account type is completely independent of what assets are held in the account.

•    The type of account you need depends on your particular situation, but if you are earning under about $75k annually, most likely a Roth IRA will best serve your short-term and long-term needs.

•    Your account requires a custodian, which is a large, well-known financial powerhouse, such as Schwab, TD Ameritrade, e*Trade, Fidelity, etc., with a website of their own.

•    Obtain a User ID from your custodian, and set up your password for anytime, anywhere access to see your balance and activity (this should all be free).

•    Fund the account with whatever cash you have available, then add to it as you can, leaving your “Rainy Day Fund” intact.

•    We suggest buying one of many Exchange-Traded Funds (ETFs) that mimic the entire domestic stock market, including SPTM, IWV, SCHB, or others.

•    Buy as many ETF shares as you can with the funds you deposit over time.

•    Repeat until rich. (OK, it isn’t quite that easy, so next week we’ll get into more complexity for accounts that have been growing.) 

Note the term ETF, or Exchange-Traded Fund, above. These investments trade like individual stocks, except that each ETF purchase contains fractional shares of many different stocks or other securities for diversification, much like mutual funds. For comprehensive definitions and explanations of all financial terms, we suggest Investopedia.com.

Van Wie Financial is fee-only. For a reason.