When I talk with someone who is trying to get started saving for the future, I notice that their eyes start to glaze over as I answer their question. I can even tell when that glaze sets in as I talk to someone on the radio.
It's typical of the problem about investing. It can seem so complicated that you might shut down and do nothing or feel you need to hire a salesperson to guide you when you hit that wall.
Regardless of your level of investment knowledge, I want to help you tear down that wall.
If you are a regular listener or viewer, you hear me talk about both the Roth account and 401(k)s regularly. The purpose of both is to give you a tax break to save for your future. The Roth you do yourself and can put in $5,000 per year ($6,000 for those age 50 or older). The Roth gives no tax break up front, but all the money you earn through the years is yours tax- free when spent after age 59 and a half. The tax-free status beats just about everything.
Where do you put Roth money? Just about anywhere you want: A bank; credit union; full-commission stock broker; financial planner; in no-load mutual funds (a fund sold without commission)' or with a discount stock broker. When you are young and starting out, I like for you to put the money with a discount broker or a no-load mutual fund. That's because I want all your money working for you.
Roths are really flexible depending on which company you choose to put your money into. You may be able to start with $50 and put as little as $50 per month into one. Or you may be able to open one for $100 with some companies, or $500 or $1,000 with others. Here are some of my favorite low-cost investment options, broken down by the dollar amount you need to get started.
My goal for you is to have an automatic deal where you put in a set amount of money each month to build the habit and reduce the risk to you. By making regular contributions monthly in equal amounts, you are doing what's called "dollar cost averaging." That's just a fancy way of saying in months that the stock market is stinking it up, your money buys more shares and in months that the market is climbing, your money buys a smaller number of shares. In other words, dollar cost averaging is a way to pace your investing so that you're buying more shares when prices are low and fewer when they're high.
Over time, putting money in this way reduces the possibility of panic in you and keeps you steady as you go. And staying in the game makes you more money over the long haul.
I hear from a lot of people who have the first part down -- putting the money into a Roth -- but are lost on the second part -- what to put the money in. On my investment guide choice list, I show a number of my favorite investments that could lose money in the short term, but make big bucks long term.
Based on your level of investment knowledge, pick one of the following guides.
The EASY guide is for beginners, or those who want to "set it and forget it."
The MEDIUM guide is for intermediate investors, requiring more involvement.
The ADVANCED guide is designed for the most experienced investors.
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