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The easy way to make sense of investing when you're just starting out
Today's 20- and 30-somethings have witnessed a miserable investment market during most, if not all, of their adult lives. But going forward, the opposite is more likely to be true. In order to build a retirement portfolio that is capable of covering expenses in your golden years, it is necessary to start saving and investing while your young. Investing in Your 20s & 30s For Dummies offers investment advice for taking the first steps as you star out on your own earning a livable income.
Investing in your 20s & 30s For Dummies cuts to the chase by providing emerging professionals, like yourself, the targeted investment advice that you need to establish your own unique investment style. Covering everything from evaluating assets and managing risk to demystifying what the phrase "diversifying your portfolio" really means, this guide offers expert investment advice that you shouldn't be without.
If you're in your 20s or 30s, the sooner you're investing, the more time you have to compound your returns and grow your portfolio. So what are you waiting for?
Introduction 1
About This Book 1
Conventions Used in This Book 2
What You're Not to Read 2
Foolish Assumptions 2
How This Book Is Organized 3
Part I Understanding Investing Terms and Concepts 3
Part II Preparing Your Investing Foundation 4
Part III Beginning Investments 4
Part IV Advanced Investments 4
Part V The Part of Tens 4
Icons Used in This Book 5
Where to Go from Here 5
Part I Understanding Investing Terms and Concepts 7
Chapter 1 Making Sense of Your Investing Options 9
Growing Your Money in Ownership Investments 9
Sharing in corporate growth and profits: Stocks 10
Profiting from real estate 11
Succeeding in small business 11
Keeping Money in Lending Investments 12
Understanding Risks and Returns 13
Understanding risks 13
Managing risks 14
Making sense of returns 16
Where to Invest and Get Advice 17
Finding the best fund companies and brokers 17
Finding an admirable advisor 19
Chapter 2 Using Investments to Accomplish Your Goals 21
Setting and Prioritizing Your Shorter-Term Goals 21
Accumulating a rainy-day fund 22
Saving for large purchases 23
Investing for a small business or home 23
Saving for kids' educational costs 24
Investing short-term money 24
Investing in Retirement Accounts 25
Understanding retirement account perks 25
Grappling with retirement account concerns 26
Taking advantage of retirement accounts 27
Surveying retirement account choices 28
Company-based retirement plans 28
Individual Retirement Accounts 30
Annuities: Maxing out your retirement savings 31
Selecting retirement account investments 32
Assessing Your Risk-Taking Desires 32
Chapter 3 Setting Your Return Expectations 35
Estimating Your Investment's Returns 36
Money market funds and savings account returns 36
Bond returns 37
Stock returns 38
Real estate returns 40
Small-business returns 40
Compounding Your Returns 41
The value of getting a few extra percent 41
Considering your goals 43
Chapter 4 Minimizing Your Taxes When Investing 45
Understanding Investment Taxes 46
Tracking taxation of investment distributions 46
Determining your tax bracket 47
Devising tax-reduction strategies 48
Reducing Your Taxes When Selling Investments 49
Weighing nontax issues 50
Tuning in to tax considerations 51
Determining the cost basis of your shares 52
Selling large-profit investments t 53
Handling losers in your portfolio 54
Selling investments when you don't know their original cost 54
Part II Preparing Your Investing Foundation 57
Chapter 5 Laying Out Your Financial Plans 59
First Priorities: Paying Off High-Cost Debt and Building a Safety Reserve 60
Paying off high-cost consumer debt 60
Establishing an emergency reserve 61
What About Paying Down Other Debts? 62
Assessing student loans 62
Considering paying down mortgage debt 64
Sorting Out Your Financial Plans 65
Considering your investment options and desires 66
Assessing your savings rate 67
Investing regularly with dollar cost averaging 68
Knowing the Impact of Investing for College Costs 70
Paying for college 71
Considering educational savings account options 73
Investing money earmarked for college 73
Securing Proper Insurance 74
Chapter 6 Starting Out with Bank and Credit Union Accounts 77
Understanding FDIC Bank Insurance 78
Investing in Banking Account and Savings Vehicles 79
Bank checking accounts and debit cards 79
Savings accounts and certificates of deposit 80
Negotiating with Bankers 82
Feeling Secure with Your Bank 83
Evaluating any bank 83
Protecting yourself when banking online 86
Exploring Alternatives to Bank Accounts 87
Credit union accounts and benefits 87
Brokerage accounts 88
Money market mutual funds 89
Chapter 7 Managing Money Market Funds 91
Defining Money Market Mutual Funds 91
Making sense of the appeal of money market funds 92
Understanding the drawbacks of money market funds 93
Understanding Money Market Fund Holdings 94
Protecting and Accessing Your Money in Money Funds 95
Protecting your money 95
Accessing your money 96
Using Money Market Funds in Your Investment Plan 97
Shopping for the Best Money Funds 98
Understanding traits of leading money funds 99
Naming good money funds 100
Alternatives to Money Market Mutual Funds 102
Part III Beginning Investments 105
Chapter 8 Getting Your Slice of Capitalism with Stocks 107
What Are Stocks? 108
How (And Why) You Can Make Money with Stocks 109
Understanding the importance of corporate profits 110
Making sense of how you profit with stocks 111
Timing Your Stock Buying and Selling 112
Following market indexes 112
Using price/earnings ratios to value stocks 114
Avoiding temptations and hype 115
Getting past the gloom 116
Sidestepping common investing minefields 117
Highlighting How to Invest in Stocks 118
Investing in stock mutual funds and exchange-traded funds 119
Picking your own stocks 120
Researching individual stocks 121
Final thoughts on stock picking 123
Maximizing Your Stock Market Returns 124
Chapter 9 Securing Investment Income and Principal with Bonds 125
Defining Bonds 126
Understanding bond issuers 127
Considering credit (default) risk 129
Making sense of bond maturities 130
Using Bonds in a Portfolio 131
Finding uses for bonds 131
Comparing other lending investments with bonds 133
Guaranteed-investment contracts (GICs) 134
Private mortgages 135
How and Where to Invest in Bonds 137
Choosing between bond funds and individual bonds 137
Investing in Treasury bonds 138
Investing in non-Treasury individual bonds 139
Evaluating individual bonds that you currently hold 140
Chapter 10 Investing in Funds: Mutual Funds and Exchange-Traded Funds 141
Understanding the Advantages of Funds 142
Maximizing Your Chances for Fund Investing Success 144
Understanding the importance of performance and risk 145
Examining fund management experience 146
Keeping costs down 146
Understanding and using index funds 147
Understanding exchange-traded funds: Index funds that trade 148
Creating and Managing a Fund Portfolio 150
Identifying the Best Mutual Funds and ETFs 152
Investing in the best ETFs 152
Picking the best stock funds 153
U.S. stock funds 155
International stock funds 155
Balancing your act: Funds that combine stocks and bonds 157
Finding the best bond funds 157
The dangers of yield-chasing 159
Recommended short-term bond funds 160
Recommended intermediate-term bond funds 161
Recommended long-term bond funds 162
Considering Alternatives to Investing in Funds 163
Your own online fund 163
Unit investment trusts 164
Brokerage managed accounts 165
Hedge funds for the wealthier 165
Part IV Advanced Investments 167
Chapter 11 Seeking Shelter and Appreciation in Real Estate 169
Comparing Owning a Home to Renting 169
Weighing financial considerations 170
Considering costs and your time frame 171
Deciding when to buy 172
Figuring Your Home-Buying Budget 173
Getting your financial house in order 173
Determining your down payment 174
Doing lenders' calculations 175
Assessing consumer debt 175
Determining homeownership tax savings 176
Shopping for Your Home 177
Understanding your housing options 177
Researching communities 179
Checking out and valuing a home 180
Investing in Investment Real Estate 181
Understanding real estate' investment's appeal 182
Sizing up real estate investment options 183
Real estate investment trusts 184
Residential housing 184
Land 185
Commercial real estate 187
Conducting real estate investing research 188
Assessing employment vitality 188
Evaluating the realty market's health 188
Valuing property and financial projections 189
Chapter 12 Taking Your Talents to the Small-Business Arena 191
Investing in Your Career 191
Deciding to Start Your Own Business 193
Weighing your options 193
Entrepreneuring at a company 194
Turning a Business Idea into Reality 194
Drawing up your business plan 194
Plotting to leave your job 198
Financing your business 199
Considering Small-Business Investment Options 201
Buying an existing business 202
Investing in someone else's business 202
Chapter 13 Exploring Other Investment Vehicles 205
Considering Gold and Other Precious Metals 205
Contemplating Collectibles 208
Understanding the allure of collectibles 208
Seeing the realities of collectibles and their returns 209
Considering advice on buying collectibles 210
Understanding Annuities and Cash-Value Life Insurance 211
Availing yourself of annuities 211
Considering cash-value life insurance 212
Part V The Part of Tens 215
Chapter 14 Ten Things to Know About Investing Resources 217
Get Educated to Discern the Best from the Rest 217
Beware "Free" 218
Understand the Influence of Advertising 218
Value Quality over Quantity 219
Know How to Check Out a Resource 220
Beware Hype and Exaggeration 221
Don't Assume Quoted Experts Know Their Stuff 221
Investigate Gurus' Claims 221
Don't Believe Investment-Newsletter Claims 222
Check Out and Keep Up with My Favorite Resources 223
Chapter 15 Ten Essential Tips for Investing Success 225
Regularly Save and Invest 5 Percent to 10 Percent of Your Income 225
Understand and Use Your Employee Benefits 226
Thoroughly Research Before You Invest 226
Shun Investments with High Commissions and Expenses 227
Invest the Majority of Your Long-Term Money in Ownership Investments 227
Avoid Making Emotionally Based Financial Decisions 227
Make Investing Decisions Based on Your Plans and Needs 228
Tap Information Sources with High Quality Standards 228
Trust Yourself First 229
Invest in Yourself and Others 229
Index 231
Overview
The easy way to make sense of investing when you're just starting out
Today's 20- and 30-somethings have witnessed a miserable investment market during most, if not all, of their adult lives. But going forward, the opposite is more likely to be true. In order to build a retirement portfolio that is capable of covering expenses in your golden years, it is necessary to start saving and investing while your young. Investing in Your 20s & 30s For Dummies offers investment advice...