Here at The Motley Fool, we aim to help the world invest -- better. And that world includes busy and uninterested Millennials who perhaps haven't contemplated investing or retirement...until now.
People like my brother, 29 years old, living the dream while teaching English abroad, who recently iMessaged me:
The Fool tends to point beginner investors to our 13 Steps to Investing Foolishly. It's quite a lot of words, though, so in the interest of getting to the point a little faster, here's an abbreviated version tailored for beginning investors who (possibly) aren't really that interested in investing.
I've broken the basics down to just six steps and divided them into three articles. This article will cover the first two steps beginning investors should take:
- Pay off debt
- Save and invest with the right money
- Always be investing
- Open an account
- Finally buy something!
- Keep buying things
Let's get started.
1. Before investing, pay down any major debt.
Pay off anything carrying interest, like credit cards and so on. "Pay yourself first," as they say. Trying to earn money in the stock market while paying down interest and debt elsewhere is basically like running in place: stupid. Also make sure you have at least six months' expenses set aside in savings, separate from your investing money.
Note: This doesn't apply to long-term debt like a car payment or a mortgage. It doesn't make sense to try to pay off a 30-year mortgage before starting to invest, because you'll just never start, and besides, the interest is relatively low.
2. Only invest money you can easily live without for the next five years. Seriously.
You should only invest with money you don't really need. Markets can do crazy stuff. Imagine if the 2008 financial collapse happened again, and you needed that money now to pay a mortgage, college tuition, health bills, whatever. You'd be forced to sell all of your stocks at a massive loss, instead of being able to wait out the market slump and end up with greater gains a few years down the road. (That grim scenario actually happened to a lot of people. Don't let it happen to you.)
Make a habit of saving a set amount of money every month, and try to buy a fixed dollar amount in stocks every three months (or whatever time frame works for you, so long as you're consistent). Don't pay a broker more than 2% for a stock trade. Nearly all brokers charge $7 to $9 per trade, so the rule of thumb is: Buy about $500 or more worth of shares in one go. That way fees don't eat into your investments too much. Note: This rule doesn't apply to the commission-free exchange-traded funds that some brokers offer. Buy as much or as little as you want of those.