Jill On Money: Investor Boot Camp 2022 – Silicon Valley

Many of you have asked about how to start investing, so here is my version of Investor Boot Camp 2022. I have framed it as a series of questions to ask yourself.

Jill Schlesinger
Jill Schlesinger 

Am I ready to invest?

Before you build the house, you need a foundation. In the case of your investment house, the foundation starts with creating an emergency reserve fund of six to 12 months of living expenses, paying down debt, like credit cards or student loans, and then turning to retirement planning/investing.

Should I invest if I have debt?

If you have a retirement plan that provides a match, yes, up to the match. Direct any extra cash flow towards debt paydown because it can often be a great investment. Think of it this way: if you have a credit card balance that costs 15%, paying it down is the best guaranteed, risk-free return you will find. With most student loans at 6% or so, paying them down usually makes more sense than risking those same dollars in the markets.

Do I have a retirement plan at work?

If yes, then the workplace plan will be the easiest way to start investing, because it automatically pulls money from your paycheck and directs it into investments of your choosing – and some provide matching contributions.

What if I don’t have a plan through work?

You can open an IRA or Roth IRA at any brokerage firm, bank, or through an app. Then, set up an automatic transfer from your checking or savings, into the IRA account. This year, the limit is $6,000 ($7,000 if over age 50).

How should I invest the money?

The basic concept of not putting all your eggs in the same basket applies to investing – we call it diversification, which allows you to spread out risk among different types of investments. The most common are stocks (ownership in a publicly traded company), bonds (loans to companies, cities, or governments), commodities (gold, oil), real estate, and money markets (cash). Most investment companies will help you create an allocation that is consistent with when you need your money and your risk tolerance. You should rebalance your accounts regularly (once or twice a year) so that your allocation remains in line with the original percentages. Many retirement plans offer automatic rebalancing, which you should use.

How do I select the “right” investments for me?

In retirement plans, you will usually find a menu of mutual funds, which are pooled investments that allow you to own a sliver of each of the desired assets. The cheapest are those that track an established stock, bond, or commodity index (i.e., the S&P 500). These cost far less than actively managed funds and over the long term, perform at least as well – and in many cases, better than actively traded funds, where investment pros try, though rarely succeed, in beating the index’s performance. You can also use Target Date Funds, where an investment company allocates the investments on your behalf, according to your intended retirement date.

Where should I open an IRA?

Wherever you can find cheap index funds, so consider: Vanguard, Charles Schwab, Fidelity, E*Trade, TD Ameritrade. You can also check out “robo-advisors,” which are automated systems that make it easy to invest. Robos prompt you to complete an online questionnaire, which considers your financial goals, time horizon, and risk tolerance. Based on your responses, the software slots you into the most appropriate portfolio. Robo fees range from 0.2%-0.5% of the account value every year. Many of the firms above have robo options, as does Betterment and SoFi – some of them also offer financial advice.

Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.