First-time Investor

December 16th, 2008, by

Q: I am a college student and ready to start investing in the stock market. I have no idea how to find a mutual fund to invest in. Can you help me?

A: Before you invest, I would make sure you are debt-free.

If you have credit card debt, the best investment would be to get rid of that debt. If you have any student loans, get rid of them first.

Here’s the thing – I know you’ve heard how important it is to invest, especially for retirement. But look at what’s happening right now. Millions of investors are losing money, and they are in a panic. Many are in a panic because they are also mired in debt.

Now, if you don’t have any debt, this is a good time to invest because you’ll be paying less for stock in companies that are still sound even if their stock price is taking a hit.

You are right to consider investing in a mutual fund, which can provide diversification and professional management.

Here are some key points the Securities and Exchange Commission (SEC) says you should remember about mutual fund investing:

  • You can lose money investing in mutual funds.
  • Past performance does not dictate future performance.
  • All mutual funds have costs that lower your investment returns. So, you need to shop around to compare many of the costs of owning different funds before you buy.

To compare mutual fund cost, use the SEC’s Calculator for Investors.

Also, before you risk any money, read up on what it means to invest in a mutual fund. Click here for a pretty good guide by the SEC.

Although I can’t tell you which mutual fund to buy, I agree with many experts who say, for the average investor, the best buy is a low-cost index fund. An index fund is a passively managed mutual fund that aims to mirror the performance of a certain index, such as the S&P 500.

Even in this crazy see-saw market, I’m glad to see that you understand the importance of investing early.

Last modified: April 18, 2011 at 2:52 pm