Expert: Steve Hach - 2/27/2008

Question
Yes I'm in the military and i would like to start investing in the market to have a little more income and i was wondering if you had any advice for some one that is the military and wants to invest.

Answer
Brad,

The best thing to do is avoid credit card debt and save as much money as possible.

Take advantage of any educational benefits so you are highly educated when you get out of the service.

If you can avoid the pitfalls of military life--blowing money on cars, motorcycles, stereos and TVs and electronics at the exchange, etc., drinking at the club and off base, strip clubs, etc.  you will be much better off.

I spent four years in the Air Force and the only thing I did right was get my GI Bill money.

Other than that, I blew EVERYTHING despite the tax advantages and extra pay from being overseas on Guam most of the time.

If you want to invest for the future, then you can do well as long as you put aside a sum of money every paycheck and do NOT spend it but invest it.

I would caution you against thinking that you will be able to invest in stocks or something and garner instant income right away.

Stocks are like a casino in the short term, day trading is not likely to lead to anything but a steady loss of cash.

You want to make few percent a month, that does not sound like much but over the long-term it leads to huge amounts of income from the compound interest.

I would start by reading the business pages of the New York Times and Wall Street Journal.  I would also read a simple book like "investing for dummies."

I would do this for @6 months and at the same time I would make sure that I was NOT using credit cards and that I was really saving some money every paycheck--10% or more is a good place to start.

Try to eliminate all debts.

Then, once I had a decent amount of savings and all other debts eliminated, I would look at investing in some diversified mutual funds or index funds that were as inexpensive as possible--people will try to hammer you with fees and you want to avoid as many of them as you can.

I would look at foreign as well as the US markets and try to spread my cash around so that no matter what something is always performing well.

Beware of get-rich quick schemes, internet stock tips, "sure things" etc.

Remember, people working in finance are there for one reason, to make money for THEMSELVES, not YOU!

Remember that in general over time stocks will always return a good deal, but in the short term you can really get burned.

If you are thinking "extra income" now, then I would not recommend stocks, if you can be disciplined and think about investing for 10-20-30 years down the road then I think stocks are a good idea.

I do not know if you plan on making the military a career, but with that sort of pension you could have a pretty nice lifestyle if you saved and invested extra money while you were in the service earning income.

I think it is totally conceivable that if you started a good savings/investment program early in your military career you could retire and live off your pension and the additional income provided by long-term investments--even if you are a junior enlisted person.

Anyway,  hope this helps Brad.

Best,

Steve