Investing 101: A Beginner’s Guide

man holding money expressing the importance of investing

Basics of Investing

Laurel Tree Advisors recently held a MeetUp Event to discuss the basics of investing. This is a topic we came up with as we receive several inquiries about investing from people of all ages. We all hear about the importance of investing but are sometimes unsure where to start.

These days, we are inundated with information about investing. If you do a Google search for information about investing, you will find a wide range of topics, opinions, and information. We found that this leaves people further confused because there is just so much information out there.

When you search online for investing information, you’ll find some investing articles to be old and out of date. Some investing articles will discuss opinions and savvy ways to invest. But the problem is that everyone is in different positions financially and emotionally and we all come from different walks of life. This means it’s tough to discern what would be the best investing advice based on a Google search when the investing article you’re reading knows nothing about you.

We covered several basic investing topics and answered several questions the audience had. In case you missed it, here are some answers to the questions asked:

Why is investing important?

Investing is important because it’s a method to invest for the future you want to have whether it’s for your retirement, paying for your children’s college tuition, or living a goals-based life financially. Investing also provides a way to outpace inflation and grow wealth. For example, a cup of coffee today might cost $2, but ten years from now cost $4.

It’s important to ask yourself what’s important to you. Whatever your answer, it needs to be made a priority in your life. If retirement is important to you, whether it’s early retirement or having a large sum of money for retirement, you need to construct a plan for how you’re going to achieve it. If family and children are important to you, is it important that you leave them some form of financial security? The list can go on…

How much money do I need to start investing?

Many people want to invest but are unsure where to start. There is a difference between saving and investing. Before anyone starts to invest in the stock market, it’s important to have a safety net and a reserve account. This is known as an emergency fund. Emergency funds are important to have so that if you were to become sick or lose a job, you have a reserve to take from.

How much do I save for an emergency fund?

It is up to you how much you save. A common rule of thumb is three to six month’s worth of savings. To calculate this amount, figure out how much money you would need to live on for three to six months. Include all of your expenses such as loans, house payments, bills and other money you need to live on. This amount can be a lot for some and a little for others – the amount can easily vary depending on your situation and lifestyle.

How do I start investing?

Once you have money saved for an emergency fund, you can begin to look at investing options. Googling “how to start investing” won’t give you the answer you’re looking for as everyone’s financial situation is different and requires a customized approach. It is the job and responsibility of your financial planner to use the right and appropriate tools and techniques to sift through all the information in your financial life to find the best plan and investment options for you.

An initial place you can try on your own is Vanguard. Vanguard is one of the world’s largest investment companies, with more than $3 trillion in global assets. You will need to take the time to understand investment terms and language to get a better handle on your investing strategy if you are looking to invest on your own.

Bonus: Is It Too Late to Invest?

What are some basic research tools to help me invest?

There are several tools to get started with investing. One tool you can use is an investment calculator. The investment calculator will help you calculate your estimated retirement savings.

Another tool is Morningstar.com. Morningstar is a great place to read the stock market news, participate in discussion boards, and offers several tools to help you on your way to investing for your future.

Still unsure where to start?

We are here to help you. Contact us to schedule a free 30-minute consultation at 216-373-0808. Laurel Tree Advisors can help point you in the right direction. Waiting to invest out of fear can hinder you from achieving your financial goals so it’s important to take the first step, today.