Investing 101: Before You Start Investing Money

Doesn’t it make sense to learn to invest (some basics) before you start investing money for real? Maybe a course called investing 101 or personal investing would be helpful. Here this retired financial planner relates a story, and then points the new investor in the right direction so he or she does not start investing uninformed.

In the dean’s office of one of the largest universities in America, I recently asked if they offered investing 101, personal investing, or any finance course where the student could learn to invest. “After all, we all need to start investing money someday, and it is much to one’s advantage to be informed vs. uninformed, isn’t it?” That was my response when told, “no, or at least I can’t find one” by the dean. I was informed that they had well over 50,000 current students enrolled and offered THOUSANDS of courses in the various colleges throughout the university. But he could find no course under the heading of personal investing or investing 101, and he was in charge of the curriculum.

We spent about an hour together searching and were both laughing out loud at what WAS offered. How about a course in “the art of falling down”? It’s offered. Investing 101? Which college in the university would offer such a course? “The athletic department is real big here; maybe they could help”, I suggested. After all, professional football players make big money. They need to learn to invest money (in case their career is short) and should start investing early. I knew a few players when I was a financial planner, but like most folks they tend to procrastinate when the money is flowing in. They’re too busy earning it, and don’t have the time to learn to invest.

The truth of the matter is that I don’t find it funny that it’s difficult to find a down-to earth practical course that most people could truly benefit from, because as a new investor you need to learn to invest money before you start investing for retirement or any other financial goal. As a new investor you may not be able to find a financial planner you can work with or afford. Even if you found one, do you really want to start investing money with him or her without first getting your feet wet in the basics of personal investing? Let’s start at the beginning.

Before you get into financial concepts like asset allocation and strategy, you should first learn the very basics: investment characteristics. How can you compare various alternatives to determine which best suit your needs, financial goals and comfort level? In other words, you need to decide what you are really looking for. And you need a list of factors to consider before you start investing money. For example, do you have a long term goal like retirement, and are you willing to accept a moderate level of risk? If so, there are numerous investment alternatives to consider, and you can also get tax breaks.