Expert: Paul Henneman - 8/16/2003

Question
Hi,
I'm just out of college without any debts (credit card, loans, or otherwise) and would like to set aside a little money each month and begin investing, though I still need to save some for going to graduate school in a couple years.  I understand that there is a lot to know and I would like to know where to get started, and what type of information I am looking for.  Any suggestions on how to get started?  

Answer
Thanks for the question!
My first suggestion would be to begin saving immediately, through a money market account. Most banks offer this, essentially it is like a savings account that provides a couple of percent return on what you have in there. Its a great place to park funds while you figure out what to do next.
Investing, as you indicate in your question is an incredibly complex and tricky undertaking. I have three  suggestions:
1. Start simple. Gain a basic understanding of everything that is out there. 'Investing for Dummies' is a book that will provide this. It is available anywhere, Amazon.com for example. Mutual funds, stocks, short selling, options, real estate investment, bonds, it is all introduced.
2. Always think long term. If your looking to day trade, I can't offer much advice other than 'Don't do it'! Only with years of experience can you even begin to have hope of making strong returns. Instead, think of what your time horizon is. If you are looking to retire when you are 60, and you are now 22 for example, you have 38 years. With the way interest compounds over time, you can certainly amass a significant fortune for your later years in life. Diversify: you should never have a marjority of your portfolio in a single investment type. The stock portion of your portfolio should be as diversified as possible, with multiple stocks instead of just one or two.
My work involves developing a 'system' that you follow. This way you can reproduce success and eliminate failures, by screening for stocks that meet a certain criteria. No need to sign up, but visit www.valuEngine.com for how we do it. There are many other choices of course out there to investigate.
3. Start a 'test portfolio' on a free service such as Yahoo Finance. It is free, you can be make your best decision on what stocks to invest, and track your performance before you begin with actual dollars. You will learn alot. Research the companies you are interested in. Look for stocks that are undervalued ('Investing for Dummies' will give you the basics on what this means)

To summarize: read a basic introduction to investing book, then start paying attention to financial news, and finally track your own test portfolios.

Please feel free to follow up by emailing me directly at paul@valuengine.com

sincerely,
Paul Henneman
President
ValuEngine, Inc.