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Beginner's Guide to Investing

Lesson 12 of 12

Picking Initial Investments

 

Beginner's Guide to Investing

Lesson 12 of 12

Picking Initial Investments

 

Lesson Info

Picking Initial Investments

but very quickly. I want to talk about this impetus of Oh my gosh, I have to actually pick investments. How do I do this? I think it's the most overwhelming part of the process. One of the easiest ways to get started is what's known as a target date fund, also sometimes called a lifecycle fund or an all in one fund. This is something that is going to moderate over the course of your time as an investor, from going to aggressive toe moderate to conservative as you get closer to retirement. What you do is you say, What's? I'm going to retire in 2065 so target date Fund 2065. In the beginning, it's got you more aggressive, and as you age, it Rebalances automatically for you. Now there are downsides of target date funds. The fees are higher, it's actively managed. Is a human going in there and tooling around with it? And also it's not tailored to use specifically. It's a one size fits all solution to something that really should be personally tailored to you. But what I like about them whe...

n you start is it takes out that panic of How do I pick my investments? And at least it gets you started. And more importantly, it ensures that your money is actually invested because sometimes people think that they're investing into their K and it's actually sitting in cash. And I have heard horror stories of people getting close to retirement age and calling up their brokerage and saying, Oh, how much is in my account? They say $200,000. That sounds like a great chunk of change. But that's just because they saved it. They didn't invest it, and that should have been in a 1,000,000 or a 1,000, 1/2. So a target date fund is one way to make sure that your money is actually invested. You don't have to stay with it if you decide in the future. Hey, I want to build my own portfolio. Or maybe you hire an advisor and they want to build it for you. You have that option to go in and change it in the future, and I just want to briefly touch on this idea of company stock is we're winding down here tonight. I don't think there's any issue with you buying company stock. Sometimes you get an advantage and you can get it into cheaper price, which is great. But keep in mind you only wanted to be a small percentage of your overall portfolio, because who else pays you your company? So if your whole investment portfolio is tied up in company stock and that's the person that pays your paycheck and something happens to your company, all your money is about to implode. So just make sure going back this idea of diversification, not all of your portfolio is tied up in company stock. Just a percentage of it. And the thing to that's really important with all of this retirement and investing in general is you need to make this a financial priority for yourself. This is how you are going to build wealth. You don't have to build your own company. You don't have to invent an app that you can sell for billions of dollars. You can actually create wealth through investing and allow your money to do some of the heavy lifting for you, and a great way to do it is by starting early and being consistent every single month. Make sure that you are putting some money into the stock market. I also love the idea of increasing it by tiny bits. So it 4% is the employer match on your for a one K, and you feel like I got some other financial priorities. I can't do 4% right now with 1% they matchup. It's automatically 2% Great, then every six months try to push it up by another 1%. You'd be surprised when you do it that slowly, you barely feel a pension, your paycheck. So it's a really easy way for you to slowly push towards your overall goal without it feeling like a shock to your budget. Now I mentioned earlier I was going to give you some. Resource is on where to get more advice Some of the websites that I really love morning store Morningstar dot com Great place to get those third party kind of look overall at different brokerage firms, different investments, they rate them for you. They show you the expense ratio, Finn Rock, which is where you confined broker Check. If you're trying to make sure that a financial advisor you want to hire his legitimate invested pd a dot com is a wonderful free resource for learning more about investing. I know I have thrown so much at you today, so you wanna be able to pause and go back on this class. But also you probably want to be able to read more, especially about those terms. Invested PD is a great place to go. Investor dot gov is actually owned by the SEC, that regulatory body. They have a phenomenal compound interest calculator. So if you want to play around for yourself how important it is to invest compared to just saving for your goals, I would go to investor dot gov and use that compound interest calculator. And finally, a lot of brokerages have wonderful online learning platforms that you don't have to be a customer of that brokerage in order to be able to use. So be sure to check those out, too, and I have to plug broke millennial takes on investing a beginner's guide toe, leveling up your money. My book. This is just truly a sampling of what's in the book. There are lot more chapters, and everything that I discuss today was just a overview goes into much deeper knowledge in the book itself to so thank you guys So much for being here. I here we've got enough time for one or two questions so I can click to this Q and a slide. Anybody have a question? Yes. So I have, like four, um, accounts for one K's from past employers, and I keep meaning to roll them all over. And no. One and I just get stalled at the paperwork. And I just don't really know why I should like some people like you might lose track. I'm like, I don't think so. Have an Excel spreadsheet. But is there another reason why you should roll over old for a one case into one account? Really common problem for us job hoppers is that we leave retirement accounts scattered as we leave. There's a couple reasons one is yes, the argument of Will. You could lose track and forget about one, especially you might not feel like, oh, that'll happen now. But in 30 years down the line, it might. The other reason to is some of those companies have a threshold for whether or not they will hold on to your account for you Sometimes it's an amount of money that needs to be in the account. They also might switch providers so they might be with one brokerage now, and in 10 years they switched to another, and that can change where your for a link exists. That could change the amount that needs to be in there. I think of it is why further complicate your financial life If you roll it all together in one, you know exactly where everything is that way. If different things change for your former employer and they change the provider or they're charging more money and fees that you might not be aware of or if you move and the information about this doesn't get mailed to you, I just think about it as why, for their complicate things rolling it over, you also might be able to roll it into your current employers for a one K plan. If you're still traditionally employed, or you could roll it into an IRA, just call a brokerage and ask. They're happy to take your business. It's actually a pretty smooth process to roll over an IRA, but it's really helpful to call someone up and talk on the phone about it. Yes, so I work for a small business, so I don't have the option of a company based for one K plan. Where would you recommend starting if I'm not self employed, but I don't have an option. If you aren't self employed, your option really is a Roth or a traditional IRA. So being able to put up to $6000 as of 2019 into that fund, it's a great way to start. I would look at your paycheck and do the math on how much money out of every paycheck it would take to put six grand aside if you can do it. And if you can't Justus Muchas you can put in there is really helpful and it make sure that you are investing for retirement in preparing for the future Tonight. One last question. Eso I am part of the group that just got demolished by the crash or the great is that I'm facing the like, so the 5% is the magic number, so it's where my student loans are. But I'm also trying to decide that difference between like if I'm already a 35 and I was supposed to start 25. Like, do I wait another 10 years or five years to get started? Because that's gonna put me back even further, Like how to use balance. Those like questions. Do you have a retirement plan? Currently they dio okay, so I would focus on that before focusing on taxable accounts. And if you can afford to put a little bit more into your K if that's what you have, that's a good way to be taking advantage of investing for your future while getting a tax advantage and also in tandem paying down your student loans. If you're trying to make up ground and you're comfortable where you are on your monthly payments on your student loans and you're okay, holding onto them for a little bit longer makes sense to put more money into that. For a one K really. In that magic 5% number, we truly were focusing more on taxable investment accounts as opposed to retirement plans. They really do time and time again. Talk about the importance of trying to Max that out. If you can $19,000 a year, so much money So I think saying that to someone like just Max out your 401 k that's honestly not grated like it's great advice if you can do it. But I don't think it is fair advice because it feels really demoralizing. Try pushing it up by a percent, see how that feels and then every six months, see if you can do another percent. The other thing, too, is that the age old wisdom of Is there another way to increase how much we bring in? Because we talk a lot about the cut cut, cut, cut. There's only so much you can cut. Can you negotiate at work for an income increase? Could you pick up some other sort of side hustle that you want to do? Is there another way to generate income that can throw more money at the debt to get rid of it faster? But focus definitely on that. For a one k you are investing, you are preparing for the future with that

Class Description

AFTER THIS CLASS YOU’LL BE ABLE TO:

  • Create an investment plan that’s right for you and your budget
  • Build your net worth through stocks
  • Know the basics of investment terminology
  • Create short, medium, and long term financial goals
  • Understand your company’s investment options

ABOUT ERIN'S CLASS:

Exchange-traded funds. Brokerages. Asset allocation.

Most people want to start investing, but have no idea where to begin. How much do you need to start? How do you know if you’re taking the right first steps? In Beginner’s Guide to Investing, author and financial expert Erin Lowry breaks down the obtuse language and lays out your investment strategy options. Learn the common misunderstandings, set your financial goals, and take strategic steps no matter your starting amount, time frame or business context -- Erin has you covered.

Don’t let beginner’s paralysis get in your way; Erin provides you with the knowledge and tools for financial literacy. Learn the basics of investment terminology, the stock market, saving for retirement and everything you need to feel confident to start growing your wealth.

WHO THIS CLASS IS FOR:

  • Young professionals

ABOUT YOUR INSTRUCTOR:

Erin Lowry is the author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together and Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling-Up Your Money. Her first book was named by MarketWatch as one of the best money books of 2017 and her style is often described as refreshing and conversational. Erin has been featured by The New York Times, The Wall Street Journal and USA Today and on CBS Sunday Morning, CNBC and Fox & Friends. When she’s not thinking or talking about money, Erin is planning her next travel adventure or probably looking up pictures of dogs. Erin lives in New York City with her husband.

Lessons

  1. Class Introduction

    Meet Erin, self-titled “investing translator” and personal finance expert. In this lesson, Erin shares her background, addresses misunderstandings regarding investing, and lays out what you’ll learn in this course: how to know if you’re ready to start investing, must-know terminology, how to handle market ups and downs, retirement plans and more.

  2. Compound Interest in Action

    What is compound interest and how does it work to maximize your returns in any investment account? Erin shows you how compound interest works in your favor over two years, five years and beyond with clear examples.

  3. Time

    Why does time matter so much in terms of investing? Examine a case study with Erin to see how time functions with compound interest to yield higher returns.

  4. Inflation

    In this lesson, learn how investing just a little money can help you combat and even beat the inevitable effects of inflation.

  5. Setting Financial Goals

    What do you need to consider when preparing to invest? Erin shares a checklist to be sure you’re ready. Learn how to approach short-term and long-term goal setting, budgeting and setting up an emergency fund. Erin explains the difference between retirement accounts and taxable accounts.

  6. Must Know Terms

    Being a new investor can be intimidating -- as someone who approached the process without prior knowledge or a finance background, Erin lays out the must-know terminology in layperson’s terms. In this lesson, learn about how to diversify your investment portfolio, factors such as your time horizon and risk tolerance, and the difference between bond funds, ETFs, mutual funds, index funds and more.

  7. Fees

    Don’t let high management fees and fine print sneak up on you; learn how to vet brokerages when considering your investment options. Erin explains and advises on expense ratios, what to ask when considering contracting a financial advisor and where to find details on associated fees to ensure you’re getting value for your money.

  8. Quick History of Stock Market

    Financial downturns have been devastating, yet studying past market events can show us how to weather the storm. Erin gives a quick review of previous American stock market downturns and how to protect yourself when the market does go down.

  9. DIY Approach

    You’re ready to invest -- how do you start? What level of involvement do you prefer? Erin walks you through different options and factors to consider: investment advisors, discount brokerages, minimum deposits, roboadvisors and micro-investing apps.

  10. Investing with Debt

    Should you be investing with debt? Whether you have credit card debt or student loans, Erin advises on whether it makes sense to start investing or not.

  11. Retirement

    Why should your investment goals prioritize retirement and why should you start now? Erin walks you through questions to consider when opening a retirement account and explains the differences between the 401k, 403b, traditional IRA and Roth IRA.

  12. Picking Initial Investments

    In this final lesson, Erin advises on how to choose your investments and approach building your portfolio. She closes by sharing valuable online resources for further information such as calculating compound interest, opening a brokerage account and researching investment options.

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