How do you start investing?

[Kermit Jizz]

For the first time in my life, I've got a little bit of spare money that I can afford to lose. I want to do something with it other than leaving it in a savings account, but I am completely overwhelmed by the options. Stocks, crypto, bonds, trusts, 401ks, IRAs, so many choices. Hell I don't even know what a couple I listed are. And even looking into one of those categories on their own is daunting, like how do you even decide what stocks to invest in? Do you just throw it in a couple things like Coke or Facebook and be content with some the meager returns you get? I'm not even sure what rates would be considered meager or lucrative.

I have no idea where to even start, please help.

 

[Table Country]

First you should take a picture of the front and back of your credit card and send the pics to me.

 

[Kermit Jizz]

First you should take a picture of the front and back of your credit card and send the pics to me.

Last time I tried that the dude just bought a lot of stuff from 'evil dragon' or some shit. I have just financially recovered from that experience and don't plan to repeat it.

 

[JULAY]

An S&P index fund is a relatively safe investment, unless the broader market tanks, it's one of the less volatile securities. Make sure that you aren't getting raped over management fees though.

https://www.forbes.com/advisor/retirement/best-sp-500-index-funds/

Also, if you are investing long-term, as in with a time horizon of decades, don't worry too much about short term declines, over the years the market will recover and you'll have pretty significant gains regardless of short-term fluctuations.

 

[thegrayman]

I think the best thing to do is start learning about personal finance. The FIRE movement is very much into freedom through money.

Early retirement extreme
mr money mustache
Your money or your life

Early retirement extreme and MMM has forums where you can ask questions. But if you want the simple short answer:


According to a study at Trinity university you can safety withdrawal 4% annually from index funds. That means you can do the math like this:
100 / 4 = 25

You annual spending: 60.000 $

60.000 * 25 = 1.500.000$ < --- This is the number you need to never work again.

Best of luck.

 

[Spasticus Autisticus]

There are two types of accounts that you need to care about: retirement accounts, and "taxable" accounts. Retirement accounts have restrictions on when you can withdraw and how much you can contribute, but they have tax advantages. Taxable accounts have none of the restrictions, you can buy/sell/withdraw whenever and however much you like, but you pay capital gains taxes on any earnings. Generally speaking, you should invest as much as you can in retirement accounts before doing taxable investments.

Open a Roth IRA at a brokerage. This is a tax-advantaged retirement account, meaning you will pay no taxes on withdrawals after age 59.5, even for earnings. Put as much money as you can into the Roth IRA up to $6000/year. If your employer offers a 401k, invest in it, especially if they offer a match. After you're maxing those out, then look into taxable investing.

Stock picking is a fool's game, it's more or less gambling. If you absolutely must invest in a specific stock, don't make it any more than a few percent of your entire portfolio. The bulk of your portfolio should be in low-cost index funds that cover a broad spectrum of whatever asset class it is (i.e. stocks or bonds). You can't really go wrong with S&P 500 index funds.

The Bogleheads wiki is a wealth of information: https://www.bogleheads.org/wiki/Getting_started

 

[Quindoll]

I think the best thing to do is start learning about personal finance. The FIRE movement is very much into freedom through money.

Early retirement extreme
mr money mustache
Your money or your life

Early retirement extreme and MMM has forums where you can ask questions. But if you want the simple short answer:


According to a study at Trinity university you can safety withdrawal 4% annually from index funds. That means you can do the math like this:
100 / 4 = 25

You annual spending: 60.000 $

60.000 * 25 = 1.500.000$ < --- This is the number you need to never work again.

Best of luck.

That number comes from a time where returns on stuff like bonds was higher though. So one might be a bit more conservative to be sure nowadays. Maybe 3.5 % or a flexible withdrawal rate.

Important:
The study claims that you can withdraw for 30 years with a 50 % bond 50 % stock portfolio without the money running out. That does not mean forever. For this you are better suited with this:

https://www.vanguard.com/nesteggcalculator

For the OP. We would need to know what your goal is for any recommendations. Retirement? Building money up for X years to then spend it on something? Without that it might be a bit difficult to give you proper ideas.

 

[thegrayman]

Yea

That number comes from a time where returns on stuff like bonds was higher though. So one might be a bit more conservative to be sure nowadays. Maybe 3.5 % or a flexible withdrawal rate.

Important:
The study claims that you can withdraw for 30 years with a 50 % bond 50 % stock portfolio without the money running out. That does not mean forever. For this you are better suited with this:

https://www.vanguard.com/nesteggcalculator

For the OP. We would need to know what your goal is for any recommendations. Retirement? Building money up for X years to then spend it on something? Without that it might be a bit difficult to give you proper ideas.

Yea, I kept it simple in interest of brevity. I believe the people behind the study updated it and found that you could probably do it on 5% going purely into the stock market. I think that nest egg calculator is probably a good tool. If you want to be safe you can just use 3%.

 

[Kermit Jizz]

If your employer offers a 401k, invest in it, especially if they offer a match.

My employer matches to a point and then matches half for the rest. Is it recommended to invest only up to the match or invest as much as I can?

For the OP. We would need to know what your goal is for any recommendations. Retirement? Building money up for X years to then spend it on something? Without that it might be a bit difficult to give you proper ideas.

Definitely want to cover retirement, but it sounds like there's limited options for that and I think I've got most of them covered atm. My main concern is that I've got extra money that is just depreciating rapidly with inflation. At minimum I'd like to make sure it maintains its value, preferably accrue value. Ideally my end goal would be to make as much money as reasonably possible. Not that I'm looking for a get rich quick scheme, but more like if there's an opportunity to make money I should take advantage of it, if that makes sense. I just don't want to be wasting opportunity.

 

[Spasticus Autisticus]

My employer matches to a point and then matches half for the rest. Is it recommended to invest only up to the match or invest as much as I can?

Invest as much as you can. Even a half match is worth taking advantage of.

 

[Quindoll]

Definitely want to cover retirement, but it sounds like there's limited options for that and I think I've got most of them covered atm. My main concern is that I've got extra money that is just depreciating rapidly with inflation. At minimum I'd like to make sure it maintains its value, preferably accrue value. Ideally my end goal would be to make as much money as reasonably possible. Not that I'm looking for a get rich quick scheme, but more like if there's an opportunity to make money I should take advantage of it, if that makes sense. I just don't want to be wasting opportunity.

Okay so I am assuming long term 10-15+ years. This of course depends on your age and the age you want to retire in.

Okay, okay. This looks like stocks might be a good solution for you. Good long-term gains. Require little work with indexing and are relatively cheap when it comes to the costs of holding the. On the downside you should, never, never ever, under and circumstances sell when the market drops. You need to be somewhat resilient against market crashes.
Because of the later I see it as important that you know what you are doing. So I recommend two books that give you good enough insight and should build up your confidence to stay on course, even in turbulent markets.

Common Sense on Mutual Funds: Updated 10th Anniversary Edition
- Basic 101 for Mutual Funds and what to do

Devil Take the Hindmost: A History of Financial Speculation
- History on market speculation. A good background here makes you way calmer when faced with market crashes that are inevitable going to occur

The tl;dr will be to put your money into a broad, and cost effective index fund. Do not trade a lot, save regularly and switch your money slowly into bonds as you get older and your preferred retirement age approaches. It's all in the first book.

Now. As far as I am aware of you can invest in stocks/index funds within your 401ks, IRAs and what else you have in that area. But since I am not from the US of A, I cannot give you any good advice on that.

 

[Drkinferno72]

Buy gold and other hard assets

 

[Non-breath oblige]

Now. As far as I am aware of you can invest in stocks/index funds within your 401ks, IRAs and what else you have in that area. But since I am not from the US of A, I cannot give you any good advice on that.

Workplace 401ks usually provide a pre-selected list of mutual funds. HSAs either have pre-selected or free range. IRAs are generally free range. For free range stuff, pick funds with no transaction fees (usually these ones are from the same company where your account is at)

Look for the ones with the lowest expense ratios (< 1%, usually Vanguard/Fidelity/Schwab). Those are generally "management fees"

If any target date funds are provided (something like "2055 Target Date Fund", the year on the fund is the general period when you reach 65/retirement age) then dump everything there if you want an easy set-and-forget because all the stock/bond allocations are done for you over time. Otherwise some combination of an S&P 500/total stock market fund + total bond market fund (100 - age in stocks and the rest in bonds has been the long "standard", but 100% stocks at a young age is perfectly reasonable).

If you have various individual large/mid/small-cap funds but no all-in-one total market funds, then you can approximate allocations resembling the total market here: https://www.bogleheads.org/wiki/Approximating_total_stock_market

For non-retirement "taxable" accounts, use ETFs instead of mutual funds for better tax-efficiency. Don't put target funds in taxable accounts (see this recent story)

 

[Devout Muslim]

Be careful about dumping all your savings into markets now. The market is in a precarious position and if it crashes it could take years to recoup those losses (assuming you didn’t invest in a stock which black holes, in which case the wealth is just gone).

 

[Kermit Jizz]

Be careful about dumping all your savings into markets now. The market is in a precarious position and if it crashes it could take years to recoup those losses (assuming you didn’t invest in a stock which black holes, in which case the wealth is just gone).

Yeah I'm pretty wary of making any major investments now. Probably will just play around with a small portion of my money until the economy smooths over.

On that note, is their anything worthwhile to be doing with the money when the market is this precarious or is it best to wait on trying anything?

 

[Flavius Claudius Julianus]

I go three ways: antiques, antiquarian texts (manuscripts, fragments, books proper,) and BTC.

This is of course on top of saving the old fashioned way, but given interest rates right now, it's basically a zero growth strategy.

I have before sold on some of the former assets to make short term cash, and my (rather ample) collection grows in value each year.

Not into stocks of any kind, primarily because that shit is all voodoo and wind whispering to me. Maybe that'll change when I make more money.

 

[Non-breath oblige]

Yeah I'm pretty wary of making any major investments now. Probably will just play around with a small portion of my money until the economy smooths over.

On that note, is their anything worthwhile to be doing with the money when the market is this precarious or is it best to wait on trying anything?

Continue to max non-taxable accounts where possible since it still can help reduce your tax burden and shouldn't be touched for decades anyway.

If you go the Boglehead route, then you DGAF about the economy in general and continue to contribute appropriately.

I Bonds (another FAQ here) are also a possibility because the bi-yearly APY rates are tied to inflation (and are currently 9.62% as a result), 10k yearly max per person (you can purchase an extra 5k with your tax return but seems like a lot of extra work to me), and you will never get back less than you invested. Big downsides are you can't touch it for a year, you lose the most recent three months' interest if you redeem them after less than 5 years, and the only gov website where you can purchase them from kinda sucks ass. Because of said 1 year no touchy rule, generally recommended to space out the contributions and buy at the end of the month since the interest for the bonds you buy applies for the entire month.

 

[Devout Muslim]

On that note, is their anything worthwhile to be doing with the money when the market is this precarious or is it best to wait on trying anything?

If I was American I would look into what bonds are available. America has a wide range of Government bonds with various benefits.

 

[Depths of Homolust]

On that note, is their anything worthwhile to be doing with the money when the market is this precarious or is it best to wait on trying anything?

We're currently teetering on the edge of a serious recession. The only thing I can recommend while we still haven't crashed yet is precious metals. If you're not into shiny rocks, just wait until next week to start investing. The Federal Reserve is expected to raise interest rates by 50 points on Wednesday, so that's gonna freak everyone the fuck out and mess with the market for a bit.

Other than that everything in this thread is pretty solid advice. Glad you're doing well.

 

[Polarity]

Reading this is a good start and will helpfully skip you over most reddit-tier advice and other posters here advising you to time the market.

If you want to play with single stocks or crypto, limit it to 5% of your net worth. But if you've never invested before, don't because that's just gambling.