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Wendy Said:

What Firm should I begin with as a New Investor?

We Answered:

Your situation is very understandable and its great that you've decided to start investing. Before I recommend what you might want to do I would say the best thing you could do for yourself is to increase your knowledge of investing. The first book I ever read about investing was "Investing for Dummies" by Eric Tyson. Its a great book and after reading it you will feel much more confident in your decision making abilities.

Before you start investing, you should ask yourself "What do I want this money to do for me?" You need to have a goal and a time horizon associated with each investment. Why? Because based upon when you will need to sell your investment, you will have it allocated in a certain way.

For example, you might have a short term bond mutual fund as an emergency fund, you might have a intermediate term bond fund for saving up to buy a house, you may have a blended mutual fund to pay for your child's college in 15 years, you may have a total stock market index fund to fund retirement in 30 years. So break each investment down based upon your time horizon.

Another important consideration is tax sheltering. If you have a 401k at work, that is a great way to start investing. If not you can go for an IRA or Roth IRA. These vehicles shelter your investment from taxes so they can grow at a faster rate.

For a beginning investor I would strongly recommend a mutual fund over individual stocks. This is because to have a broadly diversified portfolio, you need many stocks over many sectors. Why bother with all of that when you can buy shares in a mutual fund that already are diversified across hundreds of companies.

I love vanguard. I used them for almost all of my investing outside of my 401k at work. www.vanguard.com They have a wide variety of mutual funds and ETFs to choose from and they have low costs. Low cost is a very important consideration when choosing investment vehicles.

But, the bottom line is that you should wait to invest until you read investing for dummies. also check out these web sites

www.moneycentral.com
www.money.com
www.yahoofinance.com

You owe it to yourself to learn about investing for yourself. It isn't very difficult and once you understand the basics you will be light years ahead of many people. And seriously, once you learn the basics of investing, I think you will see you don't need a financial adviser to hold your hand. Its pretty easy to do on your own. I occasionally use one when I have a complex situation or question, but I only use fee based planners who I pay by the hour. This removes their bias to sell the products they get a commission on. Read investing for dummies and it will explain how to pick a financial adviser. You will be very happy you decided to become an investor. Its a very empowering thing to do. Good luck!