Hello, I'm your host, Mr. Chuck. I'm a retired accountant, turn truck driver, I have reduced my debt to zero in a short matter of time, debt reduction to achieve financial freedom takes commitment, confidence determination, you thinking about starting to invest in a market? I refer to the stock market? What do you need to do before you get started? What do you need to know? Get started and one moment together, we're going to explore our finances and figure out how to improve them. reduce debt increase wealth is a podcast to inform those to improve personal finances, whether it's eliminating debt or making smart investments, investing principles, what you need to know before you get started investing and what you should know. And what do you need to do before you get started? Are you really ready to start investing money, investing in the stock market is a long term proposition. You cannot buy something on Monday and expect to sell it on Friday. Well, I guess if you could, if you would consider yourself a day trader. But if you're new to investing in the market, you definitely don't want to do that. Before you get started, your financial situation should be somewhat under control. You should have at least a financial plan for your personal life, have a budget setup, so you know how much money you can set aside to invest because once you put it in a market, it needs to stay there. And the longer the better. That's why everybody says, you start out by saving for your retirement, when you're saving for your retirement, it's a long term. So the earlier in life you get started, no matter how much you start with. And the longer you do it stay the course, the more money you're gonna have when time to retire comes around. So are you ready to get started? Well, this start with the basics. Do you have a job? Where are your employer is offering a retirement plan of some type? Whether it's a 401k, a simple retirement, simple IRA, whatever a retirement plan? And are you eligible to start making contributions to that plan? If you answer yes to both of those, and you're not doing that, that's the very first thing you need to do is get with human resources. Find out if you're eligible, and get started making contributions to that retirement plan, how much depends on how much they are matching. If they're matching 1% of your pay, you put in 1%. If they're matching 4%, you put in 4%, you want to max out the matching, because if not, you're leaving money on the table, your employer is giving you a benefit. In order to receive that benefit. You need to make contributions. That's number one. If you are self employed or have an employer, we don't have a retirement plan. Or maybe you do have a retirement plan at work, but you just started working there. And you have to work there two years, let's say go ahead and set up a individual retirement account known as a IRA. And try to put in as much as you can into that IRA, up to the yearly limit, which I believe is around $5,000 or$6,000. Check with your tax advisor. Any place you go to get started when you set that up, we'll be able to tell you the maximum contribution and then put in what you can afford that is your starting point. Start saving for your retirement. Now the earlier start, the better off you are. Once you get that going. Then what do you need to do before you start making additional investments in the stock market bond market? Some sources that I've checked such as boggle heads.org said don't start investing in the market until you get rid of all your high end Interest debt. high interest debt is any debt where you're paying more than 10 or 11% rate of interest, mostly credit cards may be personal loans, payday loans, if you got payday loans, you shouldn't be investing in the market. Another source I have, in my show notes, I'm not gonna read it, it's an article says she followed the advice of the financial advisors she talked to when she was in her 20s. And she claims she missed out on opportunities and investment. And at cost her, long term, because she was trying to pay off her student loan debt. So my question would be, is your student loan debt have an interest rate greater than 10%? I probably not. So if you go by bogleheads.org and just concentrate on paying off your high interest debt first, then start investing, that's probably a good piece of advice. And why is that if you invest in the market, you're going to only have a little bit in there. And maybe you're gonna earn eight to 12% a year. But if you have a credit card debt that you're paying 17%, or 21% rate of interest, when you pay that down, that's a 17 to 21% rate of return because you're reducing that interest by that amount. So as long as you can get a larger return on your money for where you're putting it, then that would be the best choice. Think like that. I go on over that pretty quick. So if you're paying out, say 20% on a credit card debt, and you owe $5,000, you need to concentrate on getting that paid down. Because for every dollar you reduce the principal, you're going to save 20% that would be a rate of return of 20%. If you put that at $50, where ever it is that you're paying against that credit card, and to the stock market, you might get eight to 12%. Use common sense and look at your numbers, you need to know your numbers. But I say My opinion is as long as you have a budget set up. As long as you have a debt reduction plan in place. As long as you have your emergency fund built up to an adequate amount where you can continue, quit creating new debt, quit using those credit cards, and you still have an extra $100 a month, $50 a month, then that money could be set aside. Especially if you don't have a retirement plan at work, set up your IRA and start putting that money in there. You have a plan in place, you know your numbers, you know how much your income is, you know how much your monthly expenses are, you got your expanding under control, you're making headway on those credit cards, start putting money in for your retirement and your own IRA. If you don't have anything at work, anything other than an IRA, I would say hold off until you get that credit card paid off, then the money that you're using to pay off that credit card, you can first increase your emergency fund to a higher number so you're more comfortable. Then second, you can take that money and put it in a non retirement investment and buy stocks or bonds. If you feel you're not going to be using that money and the near to mid term length of time. So if you think you can set that money aside on a monthly basis every month and not need to use it for till five or six years down the road, then you're ready to go. Then one note, you're probably gonna hear people tell you maybe an insurance agent, that maybe an annuity would be a good thing to do. And nudity is not investing in the stock market. And annuity is an insurance company investment. It's an insurance company item that they're trying to sell you just like selling you life insurance. They try to sell you an annuity. So be aware of that and do your homework, read your fine print and don't do anything that's going to tie your money up for a long time. term or cost your money if you try to get it back out. So what you do next, you have a budget, you have a debt reduction plan in place, or you have no debt, you're contributing to your 401k, your IRA through work, or on your own. So you feel pretty confident, you have an emergency fund, it's already built up with three to six months more, the better. And you feel that you have money in a savings account that's not earning you very much. What you'd be right is that savings account a high yield, even if the high yield is still not really paying you that much. So if you don't need the money on a regular basis, you have enough in your emergency fund to cover anything that might pop up. And you're looking for a long term investment, what do you do, investing in the stock market is a thing to do. But you don't know anything about it. So there are seven investing principles. And I get this from Charles schwab.com investing principles. And they have a pretty extensive website. Remember, they are a stock broker. And whenever you buy or sell stocks or investments, they charge you a commission or a fee. That is my disclaimer. So number one thing you can do is establish a financial plan. Why are you investing in the market? How long do you want to invest? How much can you put in on a regular basis? Let's say monthly? How long are you going to do it? And when are you planning to use the money as the first thing you need to do, sit down, jot down yourself some notes. Get yourself an idea of why you're doing this. Other than saving for retirement, maybe you're saving to supplement your retirement, maybe you're doing it because you know you need to want to buy a different home, five to 10 years down the road or you're planning on moving maybe you want a second home or a vacation home, whatever it is write it down. Number two, start saving and investing today. Pretty simple. Three, build a diversified portfolio. What does that mean? diversification is key to your long term investing. Diversification means to spread your money around so you're all your eggs are not in one basket. Because if you drop the basket, you could break all your eggs, philosophy. So you want to diversify, you want to have some 10% of your money and one asset group you want 10% of your money and another asset group 110 percent of your money, maybe a bond something a little more conservative on down the road. Now it doesn't have to be 10%. It could be a third, a third and a third bogleheads.org has in their website. A good write up on how to do this. They're saying a third of your investments in US stocks, a third of you investments in bonds, and a third of your investment in international stocks. So you're covered domestic, US covering global, the rest of the world as far as stocks, and you got some conservative in there with bonds. So if the market drops, your bonds are going to usually go up. When the bond when the market goes up, the bonds usually go down. So you're diversified. That's bobbleheads.org. It's in my show notes. You want to minimize your investing fees and taxes. So you gotta look around. That's where ETF's, electronic transfer funds or lonneke, Funds Transfer whatever are good because they're low cost and mutual funds. Mutual funds help build a diversified portfolio, because instead investing in one company investing in multiple companies. You want to protect against significant losses. And you need to plan what your strategy will be If the market drops 30% what are you gonna do? Are you gonna sit tight, and wait it out? Are you gonna sell or what? And you need to rebalance your portfolio regularly. What that means is you're going to have some investments that do better than other investments. And you want to keep your ratio, your percentages, whatever you set up Initially, the same. So you ones that are way high, you sell off some, and you take that money and put in the ones that are way low. So you still have a, say, a third, a third and a third, and seven and nor the noise, which means don't do anything that somebody tells you to do. Don't, when you read the paper, newspaper, whatever you're reading, whatever information you're getting, don't pay any attention to it. Don't base your investing strategy off what somebody else is saying. Your friend might say, this is a good investment, I bought a bunch of it, maybe you should too. If you do your research and is something you're interested in, maybe put two 3% in there. Don't Don't go overboard, be conservative on what you're doing. That's a swab. And then I'm going to go to a another article by I think it's a Borden investor planner.com 10 investing principles. And number one is a brace and investing strategy and support and what kind of investor you are and adhere to the principles of your investing strategy. Invest in a margin of safety. Our Don't take too much risk, but you know, you got to know you got to take some risk. So, too little risk is not good. Too much risk is not good. At asset allocation is number one your asset allocation, how you divide your portfolio among different asset categories will be the biggest determination of you investment returns. diversification is vital investment diversification is small numbers provide enormous benefits. In other words, five investments is much better than to 10 investments is better than five. However, the marginal benefits of adding additional investment decreases as the number gets larger until the costs become greater than benefits. Number five invest for the long term. Short term investing is one of the biggest downfalls of current investing strategy. The truly great investors realize if you buy an investment at a favorable price, it may take time for the market to recognize his true value. long term investment is one of the most important investing principles, because short term trading usually leads to poor long term performance. This is common because many investors let fear and greed cause them to make bad decisions. The long term will take care of itself. If you make wise investment decisions to start with, keep expenses low. most investors don't realize how much difference high expenses make to their portfolio. And then they got some numbers here. Use compound to compounding to your advantage. Compounding or exponential growth, they mean the same thing. It's a powerful financial concept, understand how it works for you and why dividend growth compounding multiplies the value of compounding. When I say dividend growth, when you buy investments are going to pay you a dividend over time. The dividends should be reinvested back into that same item. That's your compounding your dividend growth. You're using the money you're earned from the investments to reinvest it to increase it. The strategy here is to build up the number of shares and whatever you're buying. When the price drops, you still have the same number of shares. When the price goes up, you still have the same number of shares. So if the price is high and you sell it, you you sell less shares. If the price is low and you sell it, you sell more shares, to get the same dollar amount out. employ risk management strategies and you can yet to do your homework work on that, anticipate market volatility and make it your friend, control your own destiny. No one cares about your money more than you do Wall Street fraud, conflicts of interest, outrageous fees, make self directing investments and attractive, upturned of they're saying it, do it yourself. If you do it yourself, you're gonna have to spend hours doing research, hours and hours, and it's gonna take you a long time. That's why once you have a X amount of say, 10 $15,000 already invested in the market, and you've been doing it yourself, and you think you're doing a pretty good job, you've had some pretty good returns, you need to consider finding an a financial advisor. That's third job, they know what they're doing. They should be a fiduciary for fiduciary, meaning they are working to your benefit and not their own. That's the difference between setting up an account with a firm like a stockbroker, their only interest in making a commission, they don't make a commission unless somebody buys or sells. They may say buy this because it's the deal. It may or may not be, they're mostly looking out for themselves trying to earn a commission, a financial advisor is not doing that, if they're a fiduciary, they are looking out for your best interest, you will do a survey for them. So they can determine what your risk assessment would be, and what your long term goals are. And then a set up a portfolio, a well diversified portfolio on your behalf. So you can meet your goals, there's no guarantee of future gain or loss. But that's what they do. Every year or whenever, if you get out of balance, they rebalance your portfolio. So you have the same risk assessments, one may grow a lot faster and another and then they rebalance that. So that your asset allocation and everything remains at a allocated and diversified nature. You may think that you're diversifying your investments if you buy mutual fund a, which is a retail companies, and then you buy mutual fund B, which is a set of, say tech companies, but they may still have same common problems with the economic economy drops, the retail is gonna do a lot worse, maybe the techs gonna do worse also. So you need to diversify retail, heavy industry. Public Utilities, because no matter what happens, everybody's gonna have public utilities, food, restaurants, whatever. You need to do your homework, and you need to have a basic understanding of it how to invest. And then over time, you'll gain more and more knowledge on what you're doing. and improve on what you're doing. You become more comfortable with the risk. It's important, you don't take too little risk, and it's important, you don't take too much risk. So then we go, and I highly recommend you check out bogleheads.org. And that's BOGLEHEADS.org. And at the top of their site, as got getting started, click on that and go here and they'll give you some information. And they're what they need investment philosophy is develop a workable plan with what you have and invest early and often, which is important. The earlier you start, the more you're going to have later on. The longer you do it. Often. the more times you make contributions to it, the more you're going to have never bear too much much or too little risk, never tried to time the market because that is impossible. Use index funds when possible, ke ep costs low, th diversify , minimize taxes, kee it simple. And stay the course And I have videos. That's thei philosophy, it's important t start early and often and sta the course, if the market i raising, you say thinking t yourself, man, these are costin too much, and it's too much t buy, stay the course kee putting your money and kee putting your money in. If th market drops, 50% keep buying i strategy is the buy low and th markets drop, it's low, you'r not going to be able to time th market, don't panic, remember your shares stay the same, n matter what the price of i would be, you still have th same number of shares. So if i drops in price, when you buy th same amount of money in there you're going to be buying mor shares. And someday down th road, it may be a year down th road, it's gonna, you're gonn have a lot more shares a lo more gain a lot more profit, an diversification is important index funds when possible, whe you're first starting out tha is good or bad. I don't know. a index fund is a fund tha follows a particular index. Mos of the mutual funds for one have read that most of thes index funds hardly ever beat th market. In other words, the don't do any better than wha the market does. And most o them do less than what th market does, because of cost and fees and fall. And neve bear too much or too littl risk. If you bear too littl risk, you're not gonna have muc of a gain or profit. If you bea too much risk, you have th problem of losing a lot of mone because you took too much risk This is not gambling, this i long term. And if you look ove the indexes, or the market whatever is done over the las 10 years, is going to be steady rise increase eight t 10% a year. If you look daily what it's doing or weekly wha it's doing, it's gonna be u down, up, down, up, down, up down. But that up, down, u down, is gradually increasin over time. Say it starts a zero, it goes up to five, i goes down to negative one, i goes up to six, it goes down t negative one goes up to seve goes down negative three goes u to nine goes to zero, you se what I'm getting at is going u and down your daily, daily. Bu over time, it's graduall increasing. That's the histor of the market. I'll be back i one moment with my fina thoughts. If you listen to thi podcast using an apple podcas app, please rate and review thi podcast for all your non Appl users. You can download iTune on a Windows machine and go t the upper left hand corner select podcast, do a search reduce that increase Well, yo can subscribe to the podcast And you can also rate and revie the podcast. I appreciate an feedback that I get when you ge started investing. This als includes your retiremen account, you need to have a pla a plan to include why you'r investing your risk tolerances what to do if the market drops what to do when the market goe way up? What do you got to d with the mone if you sell it, need to minimize your risk. Gotta take a little risk but not too much risk. You got to start early and often make contributions to those investments. You've got to stay the course no matter what happens. And don't pay any attention to the noise out there. If you read articles about the stock market, if you hear friends saying things about the stock market, do your own investigations. Don't take anybody's word for any. If it sounds too good to be true, it probably is. And annuities are an insurance company's product. It's not an investment. Things you really should learn on your own. What are mutual funds? What are EFT? How to diversify your account, and how often you should rebalance. Those are the most important items we need to understand and know about. Even if you have a financial adviser doing those things for you, the more you understand what he's doing. You can direct your questions to more current market position questions or investment type questions and not amended straight of questions of what's going on and what he's doing. As you'll know why he's doing it when you look at your account or stay focused and stay the course.