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-- Posted: Aug. 24, 2000

Dorothy Rosen -- The Dollar Diva Ask the Dollar Diva

How does a new grad start investing?

Dear Dollar Diva,
I am a recent college graduate with no personal finance training. There are thousands of resources all claiming to have the answers and honestly, it's a bit overwhelming.

Without spending the next 10 years simply trying to find out how to start, I thought I'd ask's investing publication, What is a good starting point for a new investor to get into the market and gain financial smarts?

Your first question asks "what is a good starting point for a new investor to get into the market?" The Diva's quick and dirty answer is: Decide how you want to invest your money, i.e. what percentage you want to go to large company stocks, medium and small company stocks and international stocks, and then invest in stock mutual funds.

Hints for the novice investor

Your second question seeks a starting point for gaining financial smarts. The Diva offers a compilation of helpful hints and corresponding links to stories, Web sites and books that will help you get a handle on the investing game. It shouldn't take you 10 years to go through this primer, and each hint you study will bring you one step closer to becoming a savy investor.

Hints for the novice investor

Helpful links

Asset allocation (also known as diversification) is far more important to your investment success than the actual stock funds you pick. And remember, a young, healthy new grad can afford to take on more risk than a retired geezer.

Asset allocation

If you are clueless about picking stock funds, invest in index funds. Vanguard is the 800-pound gorilla in this jungle.

What is an investment index?


The sooner you start investing, the sooner you will find yourself walking in the shoes of a wealthy dude.

The impact of saving early

Invest the maximum in 401(k) plans, whether or not your employer matches.

How do we calculate our 401(k) savings?

Should I pull out of my 401(k) plan?

Investing in tax-deferred retirement plans, such as 401(k)'s or IRA's, is a long-term deal. It costs a bundle to take early distributions from them.

When you owe on a 401(k) loan and can't pay it back.

Look for no-load mutual funds with low expense ratios.

Mutual fund fees

Spend less than you earn, stay out of debt, set goals, spend time managing your money and you you're on your way to becoming The Millionaire Next Door.

The Millionaire Next Door

Saving comes before investing. Accumulate enough savings for emergencies, including living expenses for three to six months in case you lose your job in a period of high unemployment.

Where do I stash my emergency cash?

Invest in tax-friendly funds when you invest outside a tax-deferred plan.

Tax friendly mutual funds.

Read your first book on personal finance.

The Green Magazine Guide to Personal Finance: A No B.S. Book For Your Twenties and Thirties

Remember, you're in this for the long haul and must suppress the urge to "panic-sell" when the market takes a dive. Think about it: because the market crashed, you're forced to sell low; when it comes back, you'll want to get back in, and you'll be forced to buy high.

That's the most frequent foul novice investors commit, and it's the exact opposite of how seasoned investors play the game.

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See Also
Financial advice glossary
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