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I am young, just started my career, and looking to begin investing so I can make my money work for me. I'm still living like I did in college (occasional purchase on myself, but most of it goes into savings) and I would like to take the extra money and invest it.

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First off, I highly recommend the book Get a Financial Life. The basics of personal finance and money management are pretty straightforward, and this book does a great job with it. It is very light reading, and it really geared for the young person starting their career. It isn't the most current book (pre real-estate boom), but the recommendations in the book are still sound.

Now, with that out of the way, there's really two kinds of "investing" to think about:

  1. Retirement (401k, IRA, SIMPLE, etc)
  2. Non-Retirement (Brokerage account, investing in individual stocks, day trading, etc)

For most individuals, it is best to take care of #1 first. Most people shouldn't even think about #2 until they have fully funded their retirement accounts, established an emergency fund, and gotten their debt under control.

There are lots of financial incentives for retirement investing, both from your employer, and the government. All the more reason to take care of #1 before #2!

Your employer probably offers some kind of 401k (or equivalent, like a 403b) with a company-provided match. This is a potential 100% return on your investment after the vesting period. No investment you make on your own will ever match that. Additionally, there are tax advantages to contributing to the 401k. (The money you contribute doesn't count as taxable income.)

The best way to start investing is to learn about your employer's retirement plan, and contribute enough to fully utilize the employer matching.

Beyond this, there are also Individual Retirement Accounts (IRAs) you can open to contribute money to on your own. You should open one of these and start contributing, but only after you have fully utilized the employer matching with the 401k. The IRA won't give you that 100% ROI that the 401k will.

Keep in mind that retirement investments are pretty much "walled off" from your day-to-day financial life. Money that goes into a retirement account generally can't be touched until retirement age, unless you want to pay lots of taxes and penalties. You generally don't want to put the money for your house down payment into a retirement account.

One other thing to note: Your 401K and your IRA is an account that you put money into. Just because the money is sitting in the account doesn't necessarily mean it is invested. You put the money into this account, and then you use this money for investments. How you invest the retirement money is a topic unto itself. 

some additional tips that I learned when I was just getting started:

  • When I was starting out with investing, I read Benjamin Graham's book "The Intelligent Investor." One of the first points he makes in the book is that there's a mutually exclusive difference between investors and speculators. Resist the temptation to become a speculator. Investors put their money in sound financial securities with good long term earning potential. Speculators buy and sell their financial securities with an eye towards the shorter term swings in performance (whether market-wide or in individual companies or industries). Investors earn money from the companies they invest in and the profits from their goods and services. Speculators earn money more from eachother... which is a zero-sum game.
  • Start by investing in a diversified mutual fund or index fund. It's better to start diversified (money spread across different instruments, industries, and company sizes) than trying to build your own diversified portfolio from scratch.
  • Don't get into buying individual stocks until you can read and comprehend a financial statement from that company. You should really understand that company's business model and prospects before committing to becoming a part owner of that company.
  • Don't be tempted to buy or sell a stock based solely on a recent rise or fall in that stock's price. Leave it to the speculators to beat eachother up trying to capitalize on short-term movements in price.
  • If you are buying a stock or other security, it should be for the purpose of holding that security for the long haul.
  • Once you buy a stock, don't look at the price of that stock... instead follow the company and make a judgement for yourself whether that company is headed in the right direction.
  • It's nearly impossible to consistently "beat the market". That would mean that you as an individual knows more than the collective whole of the market. Treat any advice that claims to allow you to beat the market with a wary eye. Along the same line, starting with an index-based fund (a fund that closely follows an index like the NASDAQ or S+P 500) is a great way to start and guarantee that your returns will not lag the market (significantly) long term.
  • Learn the power of "cost averaging" - that is investing the same amount consistently every month/quarter regardless of the current performance of the market. This has the effect of buying more shares when the market is down, without needing to predict when the "bottom" is and potentially "missing the market".
  • Invest your money in different instruments depending on the time horizon for your savings goal. For savings goals that are more imminent (e.g. for a car, boat, or house downpayment), invest in safer, more guaranteed instruments like bonds and CDs. For long term goals (retirement), get a bit riskier (stocks, mutual funds, ETFs).
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