Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

Novice investor needs advice

Dear Dollar Diva,
I am a novice investor and was wondering if you could recommend a book that would give me straightforward but useful investment advice.

Also, I am starting to pay back my education loans, which range in interest from 5 percent to 8.8 percent. Does it make more sense to invest my extra money, or pay off my loans faster?

New investors should begin by investing in mutual funds. It's a lot easier to learn about picking funds than picking stocks.

To get your arms around fund investing, read Alan and Stephen Cohn's The Sage Guide to Mutual Funds: Superior Investment Wisdom from the Number One Online Mutual Fund Gurus. Analyzing and picking funds online is fun when you have the Cohns walking you step-by-step through the process. They will also teach you how to use the tools offered by Morningside.com, the gorilla mutual fund analyzer.

Most of your investing success will come from developing and maintaining an asset allocation plan. The actual fund selections are secondary.

Talk to six different financial planners, and you'll probably get six different allocation recommendations. The following table provides a sample of allocation categories and percentages that an investor might select:

If you're in your 20s or 30s, you can afford to take a higher risk than if you are in your 50s or 60s; and you should. At 30, you have plenty of time to ride the waves of the stock market; even if it hits a perfect storm.

The Diva reminds you of the golden rules of wealth accumulation:

• Spend less than you earn
• Stay out of debt
• Set investment goals
• Develop an asset allocation plan
• Select no-load, low-fee funds
• Stick with a plan until there's a good reason to change it
• Do not "panic-sell" when the market hits a low

Investing vs. debt repayment

If you can invest in a tax-deferred plan such as an employer-sponsored 401(k) plan or an IRA, and you have extra cash, do it. But first make sure you have enough saved in a money market fund to cover those inevitable emergencies, like being out of work for a couple of months or replacing a dead car.

The interest on your student loans is relatively low, and may be deductible for the next five years; the rules are explained in the IRS 1999 1040 Instructions. If the interest is deductible, it probably makes more sense to use your extra cash for saving and investing. At least for the next 5 years.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.