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Educate ME!

Question: Hi, I just got out of college and am now part of the working world! My income >is considerably higher than my expenses and I would like to start learning >about investment options and such. As a start I have been reading several >news groups in an attempt to learn terminology, and get a feel for how things >work. This is going ok, but I would also like to find some resources aimed >at the novice investor. I have $20,000 or so in student loans, so it will >take me a little while to pay these off, so I have some time to learn, before >I really feel like I can afford to take some risks.

Answer: Buy a book. Specifically, I recommend “Getting Started in Stocks” published by Wiley (I think), it is clear and concise, and well written.

Once you’ve done that, you’ll have to figure out what your plan is. As you say, paying off loans is a good idea. But if the loans are not high interest, you may be better off investing some of your money as you pay the loans off, so that you can get investment income to help you pay the loans! There will be tradeoffs you will have to manage. YOu are on the right track though, learning as much as possible is a good idea, and when you know enough, make your own decisions, and take the level of risk you are comfortable with.. Where does one start?!?!?! As an aside, I might mention that you should also be thinking about establishing a safety savings account holding the equivalent of 3-4 months of gross salary in it. Keep a hold on your debt levels too. Well with that out of the way, I found a good intro booklet entitled “Investing Strategies,” put out by the Investor’s Alliance. It’s a darn good initial overview of investing strategy. After getting that level of book under your belt, you may want to take a look at titles such as “Investment Analysis and Portfolio Management,” by Frank Reilly, “Securities Analysis–A Personal Seminar,” put out by the NY Institute of Finance, “The New Contrarian Investment Strategy,” written by Forbes magazine contributing writer David Dreman, “Investment Psychology Explained,” by Martin Pring(a technical analysis guru) and “The All-Season Investor,” also by Pring. You may want to also think about joining the NAIC as an individual member as it forces you to look at stocks in an organized fashion as opposed to the willy-nilly ways of some individuals. Later on, you can look at the classic, Graham and Dodd’s “Security Analysis.” It’s a little on the dry side, but it should be on every investor’s bookshelf. If you really want to get into some high-powered math, take a look at “Portfolio Selection,” by Harry Markowitz, a joint Nobel prize winner. And to keep an eye on historical returns you may want to purchase the most recent Chase Investment Performance Digest, which illustrates the performance and rankings of the world’s major investments from 1960 to 1995…….this would be a nice start……..

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