Investing Demystified

      26 Comments on Investing Demystified

As I’ve talked to people a lot about finances in the last year or so, investing always comes up.  Two common themes arise:  1)  I know I SHOULD be investing but 2) I don’t know how and it’s really overwhelming.  I’d like to debunk these 2 myths in this post.

“I know I SHOULD be investing”

Well, should you?  Stop comparing yourself to others and what you think other people are doing!  When I sit down with folks one on one, there are a lot of goals we talk about.  Debt repayment is often #1.  Next comes saving up for big purchases like a house, wedding, or car.  Often these folks also have a 401k with their employer, so they already are investing.  So it really comes down to people thinking they should be “playing the stock market” and feeling guilty if they’re not doing so.  If you are contributing to your 401k to the point of your company match, your next steps should be paying off debt, building an emergency fund and saving up for any big ticket items.  If you plan to buy a house, make sure you have saved the 20% downpayment plus the extra 3% for closing costs.  That’s a big chunk of change!

Now, I’m pretty conservative and would recommend you save in an online high-interest liquid savings account.  While you COULD invest this money in the stock market to gain larger returns, you are taking a risk that you will lose that money in the short-term.  My guidance with investing outside of retirement is that you are using money that you can AFFORD TO LOSE.  You definitely don’t need it in the next 5 years.  It’s not your emergency fund, it’s not your home downpayment, it’s not your wedding fund.  Getting to the point where you have achieved all your savings and debt repayment goals and you now have extra money to “play” with is a pretty advanced move.  You are in the majority if you have not gotten there yet, so don’t feel guilty that you’re not day trading in the stock market.  You have worthy goals to achieve in the meantime!

“I don’t know how and it’s really overwhelming”

Indeed, there are a sea of individual company stocks and mutual funds out there available to invest in.  I believe a lot of people think if they did a lot of research and picked just the right stock or fund, it would be like winning the lottery.  If you don’t have time to research individual companies, you need not be overwhelmed.  It seems too good to be true, but a basic S&P Index Fund is the slow and steady tortoise that wins the race!  You’ll be instantly diversified as the S&P index includes 500 companies.  You will not incur high fees as the fund is automated and you don’t have to pay a person to manage it.  The long-term returns beat all other mutual funds!  I’ve been hearing this over and over but I recently came across this article where Warren Buffett bet on an S&P index fund and won in a wager over the last 10 years.  My man, Warren, has been recommending S&P index funds for a while.  Many other financial gurus are also proponents of index funds in general.


“I’m ready to invest in an S&P Index Fund, how do I start?”

  • If you are within the income limits for a Roth IRA, I would love for you to start there.  Open an account through an online brokerage firm such as Vanguard and invest in the S&P within a Roth IRA.  Your goal will be to contribute the annual max set by the government (for 2017 and the last several years it has been $5500) by making regular contributions ($458.33 per month will get you to the $5500 for the year).  If you are over the income limits for a Roth, you can also invest in a Traditional IRA.  Here’s a refresher on the different Retirement options.
  • You can check your company’s 401k fund options and see if there is an S&P index fund to invest in there.  If you’ve contributed to the point of the match,  fully-funded a Roth IRA, and still have money left over, increase your 401k contribution to the max or see if your company offers a Roth 401k option.
  • Once you’ve done both of the above, you could invest in non-retirement accounts and open a basic investment account, also through an online brokerage firm. A good option for beginners is Robinhood. It’s an easy way to start investing with smaller amounts of money without all the fees. I feel like this is the peak of financial management.  It means you’ve paid off all your debt (maybe still working on that mortgage), have an established 8-9 month emergency fund, and are contributing a good chunk of your income to tax-advantaged retirement accounts.  This is like AP Personal Finance.  You may not get here any time soon, and that is OK!!


  • If you’re not investing outside of a company 401k, it’s OK!!  Pay off debt and accumulate liquid savings first.
  • An S&P Index Fund is the way to go for diversification, low fees and great long-term returns.

I try to make the point a lot that personal finance is pretty basic and simple.  This investment advice is an example of that.  You can do it if you put your mind to it, and THAT is the hardest part.  Being disciplined.  Spending less, saving more, avoiding debt.  I hope I keep driving that home to my readers and that’s why I’m fascinated with all the psychological barriers to financial success that we make for ourselves (and America makes for us)!

Did I demystify investing for you?  Do you feel less guilty?  Let me know in the comments below!

26 thoughts on “Investing Demystified

  1. Hairstyles

    I found your blog site on google and verify a few of your early posts. Continue to maintain up the excellent operate. I simply extra up your RSS feed to my MSN News Reader. Seeking ahead to studying more from you later on!?

  2. Fashion Styles

    Hi, Neat post. There’s a problem with your website in internet explorer, would test this?IE still is the market leader and a big portion of people will miss your magnificent writing because of this problem.

  3. Free Stuff

    What抯 Happening i am new to this, I stumbled upon this I have discovered It absolutely helpful and it has aided me out loads. I’m hoping to give a contribution & assist other customers like its aided me. Great job.

  4. Fashion Styles

    Thank you, I have just been searching for info about this subject for ages and yours is the greatest I’ve discovered so far. But, what about the conclusion? Are you sure about the source?

  5. Lifestyle

    Heya i am for the primary time here. I found this board and I to find It really useful & it helped me out a lot. I’m hoping to offer one thing back and help others like you aided me.

  6. 더킹카지노

    It’s appropriate time to make a few plans for the future and it is time to be happy.
    I’ve read this submit and if I may just I want to suggest you few fascinating things or
    suggestions. Maybe you could write subsequent articles relating to this article.
    I want to read even more things about it!

  7. Lifestyle

    Hello there! Quick question that’s entirely off topic. Do you know how to make your site mobile friendly? My site looks weird when browsing from my iphone 4. I’m trying to find a theme or plugin that might be able to correct this problem. If you have any suggestions, please share. Thank you!

  8. Hairstyles

    Throughout the grand pattern of things you receive an A+ for hard work. Where you actually misplaced me was first on all the specifics. As they say, the devil is in the details… And it couldn’t be much more accurate in this article. Having said that, permit me reveal to you just what did deliver the results. Your article (parts of it) is definitely extremely engaging and this is possibly the reason why I am taking the effort to comment. I do not really make it a regular habit of doing that. 2nd, while I can certainly see the leaps in logic you make, I am not necessarily convinced of just how you appear to connect the ideas which help to make the actual final result. For the moment I shall yield to your issue however hope in the near future you actually link the facts much better.

  9. Beauty

    One other thing I would like to convey is that as opposed to trying to suit all your online degree training on times that you finish off work (since the majority of people are worn out when they get back), try to arrange most of your classes on the weekends and only one or two courses for weekdays, even if it means taking some time off your end of the week. This is beneficial because on the week-ends, you will be a lot more rested as well as concentrated upon school work. Thanks alot : ) for the different recommendations I have acquired from your site.

  10. Short Hairstyles

    Thanks for your submission. I would love to say this that the very first thing you will need to conduct is find out if you really need credit repair. To do that you will need to get your hands on a replica of your credit rating. That should really not be difficult, since the government necessitates that you are allowed to receive one free copy of your credit report yearly. You just have to consult the right folks. You can either browse the website with the Federal Trade Commission or perhaps contact one of the main credit agencies right away.

  11. Black Hairstyles

    Hey there! This is my first comment here so I just wanted to give a quick shout out and tell you I truly enjoy reading through your posts. Can you suggest any other blogs/websites/forums that deal with the same subjects? Thank you!

  12. Hairstyles VIP

    Hello there! This is my 1st comment here so I just wanted to give a quick shout out and tell you I really enjoy reading your blog posts. Can you recommend any other blogs/websites/forums that go over the same subjects? Thanks for your time!

  13. site

    Fabulous post, you have denoted out some fantastic points, I likewise think this s a very wonderful website. I will visit again for more quality contents and also, recommend this site to all. Thanks.


Leave a Reply

Your email address will not be published. Required fields are marked *