Cents and Sensibility


Saturday, July 7, 2001

Tips for new investors

Investing may seem confusing -- but it doesn't have to be. If you're new to the investment world, or if you haven't started investing, you'll get off on the right foot by following a few common-sense guidelines. Here are some to consider:

>> Build up your liquid savings before you start investing. You should have anywhere from six months to a year's worth of living expenses saved before you start investing. If you don't, you may have to deplete some of your investments to pay for unplanned expenses. Still, you don't have to relegate your savings to a passbook account that pays almost negligible interest. Instead, look for a money market account that offers a competitive rate and easy access to your funds. Be aware, though, that a money market fund is not insured or guaranteed by the government. Money market funds strive to preserve the value of your investment, but it is possible to lose money.

>> Pay yourself first. If you wait to invest until after you've paid the mortgage, utilities, grocery bills and countless other expenses, then you'll probably never invest. As soon as you get paid, put whatever you can afford into an investment. You can even have your bank directly deposit the money. That way, you won't really miss it. And when you get a raise, you can increase the amount of your contribution without affecting your lifestyle. Consider investing any bonuses you get as well. By regularly putting this found money to work, you'll speed up your progress toward your financial goals.

>> Diversify your investment dollars. When you're first starting out, you may not have enough money to buy a wide variety of investments, so you might want to choose just one or two. Over time, if you have more resources available, you can diversify further by purchasing stocks, bonds and other vehicles. Generally speaking, the more diversification you can achieve, the better off you are.

Raiding investments to pay for major purchases, investing in an irregular or haphazard manner, concentrating investment dollars in just a few vehicles -- all these actions can hobble the success of even experienced investors. So, get into some good habits early.

Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at:

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