Author Topic: where to get the basics on investing?  (Read 4453 times)

FunkyChopstick

  • 5 O'Clock Shadow
  • *
  • Posts: 42
  • Location: Philadelphia, PA
where to get the basics on investing?
« on: January 15, 2016, 04:22:00 PM »
Hey Stachers-
     Stache newbie needs advice. Where should I go to get basic investing information? Basic, pre-k, ground zero level of understanding these financial concepts. I know what a 401k and a Roth IRA is but everything else is an ocean of alphabet soup.

Can anyone recommend a website or book that has been helpful? I have tried going through the posts but when you just try searching "investing basics" it gets a bit wild. I will check out the library next week but any trusted sources are welcome!

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 2901
  • Age: 81
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: where to get the basics on investing?
« Reply #1 on: January 15, 2016, 05:31:14 PM »
Jim Collins' stock series is super awesome:
http://jlcollinsnh.com/stock-series/

Bogleheads wiki is great too:
https://www.bogleheads.org/wiki/Main_Page

And of course, after going through those (Collins' site is best to start with), come look around here and ask questions as there are some amazing folks that are also willing to help a newbie out. (I was a total wet behind the ears newb a few years ago, and all of this is what got me up to speed).

terran

  • Handlebar Stache
  • *****
  • Posts: 1864
Re: where to get the basics on investing?
« Reply #2 on: January 15, 2016, 08:14:37 PM »
In addition to the above two excellent resources: https://www.etf.com/docs/IfYouCan.pdf

Cornbread OMalley

  • Handlebar Stache
  • *****
  • Posts: 2295
  • Location: Kansas
Re: where to get the basics on investing?
« Reply #3 on: January 18, 2016, 07:17:39 PM »
I highly recommend the book Bogleheadsí Guide to Investing.

Noahjoe

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: where to get the basics on investing?
« Reply #4 on: January 19, 2016, 07:23:25 AM »
Second what Cornbread says. I read this book and successfully took control of 100% of my finances and never looked back.

mcj

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: where to get the basics on investing?
« Reply #5 on: January 19, 2016, 07:29:14 AM »
Investopedia is a good resource for reference and definition of concepts/terms etc

FunkyChopstick

  • 5 O'Clock Shadow
  • *
  • Posts: 42
  • Location: Philadelphia, PA
Re: where to get the basics on investing?
« Reply #6 on: February 15, 2016, 05:05:33 AM »
Thanks guys for all the info. It is a jungle out there!

TomTX

  • Magnum Stache
  • ******
  • Posts: 3332
  • Location: Texas
Re: where to get the basics on investing?
« Reply #7 on: February 15, 2016, 07:07:20 AM »
Thanks guys for all the info. It is a jungle out there!

1) Invest all you can.

2) Keep expenses low where you can. 0.10% per year is low. 1% is high.

3) Pick a broad based US stock fund (such as VTSAX) where you can and stick to ONE fund until you have at least $50k. "Diversifying" is a rabbit hole for many new investors, and many "financial advisors" use this technique to keep investing seeming complex and scary.

4) Use tax advantaged accounts (IRA, 401k) where you can. Always contribute enough to the 401k to get the full company match (free money!)

GrOW

  • Bristles
  • ***
  • Posts: 273
    • Gringing Out Wealth
Re: where to get the basics on investing?
« Reply #8 on: February 15, 2016, 07:13:52 AM »
Thanks guys for all the info. It is a jungle out there!

Definitely read 3-4 different things. All of the recommendations here are great but you will find that all have a specific skew to them. That is not a knock on them at all but just noting that people tend to have their POV set to match their passion. Yours might be slightly different. After reading 3-4 different things, you should begin to spot these skews, accept them, and still apply their advice in a way that matches your specific passion and needs.

ReadySetMillionaire

  • Pencil Stache
  • ****
  • Posts: 949
  • Location: The Buckeye State
Re: where to get the basics on investing?
« Reply #9 on: February 15, 2016, 07:40:39 AM »
I highly recommend the book Bogleheadsí Guide to Investing.

Second this. Starts you at the ground floor and works its way up to give you a solid understanding of a lot of "adult" decisions (retirement, life insurance, etc.).

Cornbread OMalley

  • Handlebar Stache
  • *****
  • Posts: 2295
  • Location: Kansas
Re: where to get the basics on investing?
« Reply #10 on: February 15, 2016, 10:33:51 AM »
Second this. Starts you at the ground floor and works its way up to give you a solid understanding of a lot of "adult" decisions (retirement, life insurance, etc.).
I second this second! :-)  The book also has a primer on long-term care insurance.  For a lot of folks if their assets grow substantially after they FIRE then LTC insurance probably will not be needed.  However, if a person is late to the FIRE quest then LTC may be a consideration.

FunkyChopstick

  • 5 O'Clock Shadow
  • *
  • Posts: 42
  • Location: Philadelphia, PA
Re: where to get the basics on investing?
« Reply #11 on: February 15, 2016, 07:00:27 PM »
Ok, I just ordered the Bogelhead's book on amazon with my  gift card from the holidays. I even got the 2014 edition so I am super pumped. I found my Saturday morning coffee hour companion!

TomTX- sorry to ask, but can you elaborate on
"2) Keep expenses low where you can. 0.10% per year is low. 1% is high."

I am still trying to figure out the whole 401k issue. I contribute the minimum to get the max on my company match which I think is a good start. I am still in awe- if I leave my company/retire/go down in flames from my brain burning how do I even get the money? As in how is it tangible? Right now it is an abstract concept to me. The 4% rule still puzzles me but I know I just need to find the primers and then I can build on it. Excited to delve into this world! Thanks peeps for all the support

ender

  • Magnum Stache
  • ******
  • Posts: 4605
Re: where to get the basics on investing?
« Reply #12 on: February 15, 2016, 07:34:47 PM »
Ok, I just ordered the Bogelhead's book on amazon with my  gift card from the holidays. I even got the 2014 edition so I am super pumped. I found my Saturday morning coffee hour companion!

TomTX- sorry to ask, but can you elaborate on
"2) Keep expenses low where you can. 0.10% per year is low. 1% is high."

Nearly all mutual fund types of investments you buy have something called an Expense Ratio. Whether 0.10% or 1%, this is the percentage of the investment that you pay to the company that owns it.

So, if you have $1,000,000 in investments - if the expense ratio is 0.10% you pay the company $1,000/year. If it's 1% then you pay them $10,000 a year.

As you can see, the difference is significant. Any fund should make this information easily available to you, whether in your 401k or IRA or elsewhere.

Quote
I am still in awe- if I leave my company/retire/go down in flames from my brain burning how do I even get the money? As in how is it tangible?

Well, the money is yours still - you own all of your money in your 401k, even if the company implodes completely. You can do what is called a rollover, which is a fancy (and unnecessarily complicated) way to transfer a 401k into an IRA at a different company.

Quote
Excited to delve into this world! Thanks peeps for all the support/quote]

Researching and asking questions is definitely the way to go.

BrickByBrick

  • Stubble
  • **
  • Posts: 117
Re: where to get the basics on investing?
« Reply #13 on: February 15, 2016, 07:42:53 PM »
Jim Collins' stock series is super awesome:
http://jlcollinsnh.com/stock-series/

Bogleheads wiki is great too:
https://www.bogleheads.org/wiki/Main_Page

And of course, after going through those (Collins' site is best to start with), come look around here and ask questions as there are some amazing folks that are also willing to help a newbie out. (I was a total wet behind the ears newb a few years ago, and all of this is what got me up to speed).

In addition to the above two excellent resources: https://www.etf.com/docs/IfYouCan.pdf

X1000

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 2901
  • Age: 81
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: where to get the basics on investing?
« Reply #14 on: February 15, 2016, 08:04:18 PM »
Ok, I just ordered the Bogelhead's book on amazon with my  gift card from the holidays. I even got the 2014 edition so I am super pumped. I found my Saturday morning coffee hour companion!

TomTX- sorry to ask, but can you elaborate on
"2) Keep expenses low where you can. 0.10% per year is low. 1% is high."

I am still trying to figure out the whole 401k issue. I contribute the minimum to get the max on my company match which I think is a good start. I am still in awe- if I leave my company/retire/go down in flames from my brain burning how do I even get the money? As in how is it tangible? Right now it is an abstract concept to me. The 4% rule still puzzles me but I know I just need to find the primers and then I can build on it. Excited to delve into this world! Thanks peeps for all the support


Not TomTX, but I think I can answer...

Each mutual fund has something called an expense ratio. This is the price you pay to buy into the fund, for operating expenses and such. So for instance VTSAX (Vanguard's total market index fund) has an ER of 0.05%. Which is super low and thus super awesome. If you start looking at the expense ratios of all the funds out there, you'll find ERs up over 2% or even 5%. These are insane and you should stay away from them. Most funds fall around .50% up to 1.5% range. So you check out the available funds in your 401k for instance, then decide what you want to hold - your asset allocation - of stocks and bonds and the like. And then you find the lowest ER for the best stock mutual funds available and the same for the bond allocation. Sometimes it is simple because you've got a broad stock market fund with a reasonable ER (under 1% like TomTX says), sometimes you might have only large cap or small cap or extended market funds with lots of different ERs... and that is where it gets a bit more complicated (and you can come here and post the list of funds/ERs and ask about what MMMers would choose and why). Sometimes you have nothing but expensive ERs. It's due to your company's admin person choosing those funds and some folks have been successful lobbying for better funds with low ERs, but sometimes you just have to hold your nose and pick the least stinky of the stinky bunch since using a 401k is still a good deal most of the time even with high ERs. (but this is a huge incentive to roll the 401k to an IRA as soon as you quit so you have a wider/better range of fund choices).

As far as the second part of your post... hooray for you contributing to get the max match - it IS a great start! :D

The company that manages your 401k does so for you - not just for your company. It is an individual account, and you would own it just like you do a savings or checking account. With a caveat: you might be out money your company put in for the match due to you not vesting if they have a vesting schedule and you leave before fully vesting. Side track: vesting is where the money they put in belongs to you only after a certain number of years, and at a certain percentage. My former workplace had a 5 year vesting plan. They would put in the full match each year that I put in money, but I vested 20% each year, becoming fully vested after 5 years. Which means that after I stayed there for 5 years, every penny of the matches since the first year is mine when I leave. But say they put in $1,000 as my match each year, and I left after year 4; I'd only get 80% of the $4K they'd put in by that point, so $3200 would be mine and stay in my account, but the company would take back $800 since I would have needed to stay through December 31st of the 5th year to fully vest. 

So when you quit a job, you can call up the company and say hey, I just left my company. Do I need to do anything? And they'll most likely say nope, you can leave this as a 401k and just forget about it if you'd like until time to withdraw money. If it's with a more expensive group and you want to move it to someplace Vanguard you can (just takes filing some paperwork and Vanguard would handle the rest).

The only thing that you'd need to do most likely besides the shifting to a better financial company (if you have a not so good one) is roll it over to an IRA, but that depends on a few things: 1) some states offer better protections against judgements and liens (like if you got sued or something) for 401ks and not as much for IRAs. But some states don't care and treat them the same, so that would something to check before rolling if that concerns you. 2) if you have special institutional shares or other funds that were provided as a company perk you might want to leave the 401k as is instead of rolling to an IRA because you wouldn't have access to those funds any more. 3) If your former company/financial group holding the account wants to start charging you a service fee since you're no longer an employee. This happens rarely, but it is something to check into because - extra fees suck, and if they want to charge you to leave it as a 401k then it's not usually worth it and a checkmark in the "roll to an IRA" box. 4) what I already mentioned briefly above: if you only have a limited range of high ER funds, then rolling the 401k to an IRA is a better idea because it's basically like jailbreaking your account (without the possibility of bricking anything :D ) With an IRA, you can choose any fund that is out there - the entire stock market really. Sky's the limit.




arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27538
  • Age: -999
  • Location: Traveling the World
Re: where to get the basics on investing?
« Reply #15 on: February 18, 2016, 04:07:52 AM »
Jim Collins' stock series is super awesome:
http://jlcollinsnh.com/stock-series/

+1.

I'd recommend everyone start there.  There's some good books to go to afterwards, but that's where I'd start first.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

FunkyChopstick

  • 5 O'Clock Shadow
  • *
  • Posts: 42
  • Location: Philadelphia, PA
Re: where to get the basics on investing?
« Reply #16 on: February 18, 2016, 06:25:07 AM »
Frankie's Girl- great info. I will definatly have to check that vesting information. Something about 3 years is rattling around in my head. Super helpful!

My book arrived last night and I was 38 pages deep by bed. So far, so good.

I have a plan. Simple, but a plan no less:

1. Pay off my credit card,  0% interest until Sept 16, that is around 7k now. It has been for mostly home expenses, bills, food, gas. I would like to be out of the hole by July.

2. I save a little over 15% now by having auto draws on pay day go to my savings account and roth ira. While I am knocking down my cc I may only contribute to the IRA . I can do a trial month from this weekend to a month from now by being super strict with myself.

3. Investing sounds like so much fun. In a calculated risk and finger touching "boo ha ha" way. I am game, just need the green.

   Side question: Does anyone use the pre-tax health money option? From what I understand you put aside x $ every paycheck and that is tax free to be used on health related expenses; co-pays, meds, etc. Since I spend almost $400 a month on insurance I am looking at going balls to the walls and seeing a few docs for wellness- cardiologist/ob/gp/etc.  Anyone do this?

PS: I have never had religion in my life. Turns me off. I feel like MMM is the closest I will ever come to religion. The juice has been drunk.

Cornbread OMalley

  • Handlebar Stache
  • *****
  • Posts: 2295
  • Location: Kansas
Re: where to get the basics on investing?
« Reply #17 on: February 18, 2016, 07:41:15 AM »
My book arrived last night and I was 38 pages deep by bed. So far, so good.

I have a plan. Simple, but a plan no less:

1. Pay off my credit card,  0% interest until Sept 16, that is around 7k now. It has been for mostly home expenses, bills, food, gas. I would like to be out of the hole by July.

2. I save a little over 15% now by having auto draws on pay day go to my savings account and roth ira. While I am knocking down my cc I may only contribute to the IRA . I can do a trial month from this weekend to a month from now by being super strict with myself.

3. Investing sounds like so much fun. In a calculated risk and finger touching "boo ha ha" way. I am game, just need the green.

   Side question: Does anyone use the pre-tax health money option? From what I understand you put aside x $ every paycheck and that is tax free to be used on health related expenses; co-pays, meds, etc. Since I spend almost $400 a month on insurance I am looking at going balls to the walls and seeing a few docs for wellness- cardiologist/ob/gp/etc.  Anyone do this?

Having a plan is good.  Glad you got the book.  I read that book nine years ago, and it changed everything for me.  I found the http://jlcollinsnh.com/stock-series/ only recently in September 2015, and it is a fantastic read too.

I think the "pre-tax health money option" you speak of is a health savings account (HSA).  I do not qualify for one so do not know all the ins-and-outs.  I have friends who have one and they love it.  They say a HSA is better than a Roth because your contributions are not taxed at all.  I am sure others will chime in and correct me if I am wrong.

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3307
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: where to get the basics on investing?
« Reply #18 on: February 18, 2016, 08:12:18 AM »
Do you have a choice about spending $400/month on health insurance?

For an HSA, you typically need to enroll in a high-deductible health plan (HDHP.) The triple great thing about these, at my previous employer was a) the HDCP plan had $0 premiums, b) you can contribute to your HSA and avoid taxes, and c) they put money into the HSA as well! Unfortunately, I don't know how common this is, but obviously this would beat paying $400/month.