Investing in Your 20s & 30s For Dummies

Eric Tyson, MBA, is an internationally acclaimed and best-selling personal finance author, counselor, and writer. He is the author of five national best-selling financial books, including Investing For Dummies, Personal Finance For Dummies, and Home Buying Kit For Dummies. He has appeared on NBC's Today Show, ABC, CNBC, FOX News, PBS, and CNN.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 2

Beyond the Book 3

Where to Go from Here 3

Part 1: Getting Started with Investing 5

Chapter 1: Making Sense of Your Investing Options 7

Growing Your Money in Ownership Investments 7

Sharing in corporate growth and profits: Stocks 8

Profiting from real estate 8

Succeeding in small business 9

Keeping Money in Lending Investments 9

Understanding Risks and Returns 10

Understanding risks 10

Managing risks 12

Making sense of returns 13

Where to Invest and Get Advice 14

Finding the best fund companies and brokers 14

Finding an acceptable advisor 15

Chapter 2: Using Investments to Accomplish Your Goals 17

Setting and Prioritizing Your Shorter-Term Goals 17

Accumulating a rainy-day fund 18

Saving for large purchases 18

Investing for a small business or home 19

Saving for kids’ educational costs 20

Investing short-term money 20

Investing in Retirement Accounts 20

Understanding retirement account perks 21

Grappling with retirement account concerns 21

Taking advantage of retirement accounts 23

Surveying retirement account choices 23

Selecting retirement account investments 26

Assessing Your Risk-Taking Desires 26

Chapter 3: Setting Your Return Expectations 29

Estimating Your Investments’ Returns 30

Money market funds and savings account returns 30

Bond returns 31

Stock returns 32

Real estate returns 32

Small-business returns 34

Compounding Your Returns 34

The value of getting a few extra percent 34

Considering your goals 36

Chapter 4: Minimizing Your Taxes When Investing 37

Understanding Investment Taxes 38

Tracking taxation of investment distributions 38

Determining your tax bracket 39

Paying attention to the 2017 Congressional tax bill 40

Devising tax-reduction strategies 40

Reducing Your Taxes When Selling Investments 42

Weighing nontax issues 42

Tuning in to tax considerations 43

Part 2: Preparing Your Investing Foundation 47

Chapter 5: Laying Out Your Financial Plans 49

First Priorities: Paying Off High-Cost Debt and Building a Safety Reserve 50

Paying off high-cost consumer debt 50

Establishing an emergency reserve 51

What about Paying Down Other Debts? 52

Assessing student loans 52

Considering paying down mortgage debt 54

Sorting Out Your Financial Plans 54

Considering your investment options and desires 55

Assessing your savings rate 56

Investing regularly with dollar cost averaging 57

Knowing the Impact of Investing for College Costs 58

Paying for college 59

Considering educational savings account options 59

Investing money earmarked for college 61

Securing Proper Insurance 61

Chapter 6: Starting Out with Bank and Credit Union Accounts 63

Understanding FDIC Bank Insurance 64

Investing in Banking Account and Savings Vehicles 64

Bank checking accounts and debit cards 65

Savings accounts and certificates of deposit 66

Negotiating with Bankers 67

Feeling Secure with Your Bank 68

Evaluating any bank 68

Protecting yourself when banking online 69

Exploring Alternatives to Bank Accounts 71

Credit union accounts and benefits 71

Brokerage accounts 72

Money market mutual funds 73

Chapter 7: Managing Money Market Funds 75

Defining Money Market Mutual Funds 75

Making sense of the appeal of money market funds 76

Understanding the drawback of money market funds 77

Understanding Money Market Fund Holdings 78

Protecting and Accessing Your Money in Money Funds 79

Protecting your money 79

Accessing your money 80

Using Money Market Funds in Your Investment Plan 81

Shopping for the Best Money Funds 82

Understanding traits of leading money funds 82

Naming good money funds 83

Alternatives to Money Market Mutual Funds 85

Part 3: Investing in Stocks, Bonds, and Funds 87

Chapter 8: Getting Your Slice of Capitalism with Stocks 89

What Are Stocks? 90

How (And Why) You Can Make Money with Stocks 91

Understanding the importance of corporate profits 91

Making sense of how you profit with stocks 92

Timing Your Stock Buying and Selling 93

Following market indexes 93

Using price/earnings ratios to value stocks 95

Avoiding temptations and hype 96

Getting past the gloom 97

Sidestepping common investing minefields 97

Highlighting How to Invest in Stocks 99

Investing in stock mutual funds and exchange-traded funds 99

Picking your own stocks 100

Maximizing Your Stock Market Returns 103

Chapter 9: Securing Investment Income and Principal with Bonds 105

Defining Bonds 106

Understanding bond issuers 106

Considering credit (default) risk 109

Making sense of bond maturities 109

Using Bonds in a Portfolio 110

Finding uses for bonds 111

Comparing other lending investments with bonds 111

How and Where to Invest in Bonds 115

Choosing between bond funds and individual bonds 115

Investing in Treasury bonds 116

Investing in non-Treasury individual bonds 117

Evaluating individual bonds you currently hold 118

Chapter 10: Investing in Funds: Mutual Funds and Exchange-Traded Funds 119

Understanding the Advantages of Funds 120

Maximizing Your Chances for Fund Investing Success 122

Understanding the importance of performance and risk 122

Examining fund management experience 123

Keeping costs down 123

Understanding and using index funds 124

Understanding exchange-traded funds: Index funds that trade 125

Creating and Managing a Fund Portfolio 126

Identifying the Best Mutual Funds and ETFs 128

Investing in the best ETFs 128

Picking the best stock funds 130

Balancing your act: Funds that combine stocks and bonds 132

Finding the best bond funds 133

Considering Alternatives to Investing in Funds 138

Your own online fund 138

Unit investment trusts 138

Brokerage managed accounts 139

Hedge funds for the wealthier 139

Chapter 11: Understanding Investment Brokers 141

Getting Your Money’s Worth: Discount Brokers 141

Assessing the high-commission salespeople’s arguments 142

Selecting a discount broker 143

Considering Online Brokers 145

Examining your online trading motives 145

Taking other costs into account 146

Looking at service quality 146

Listing the best online brokers 147

Part 4: Investing in Real Estate, Small Business, and Other Investments 149

Chapter 12: Seeking Shelter and Appreciation in Real Estate 151

Comparing Owning a Home to Renting 152

Weighing financial considerations 152

Considering costs and your time frame 153

Deciding when to buy 154

Figuring Your Home-Buying Budget 155

Getting your financial house in order 155

Determining your down payment 155

Doing lenders’ calculations 156

Shopping for Your Home 158

Understanding your housing options 158

Researching communities 160

Checking out and valuing a home 161

Investing in Investment Real Estate 161

Understanding real estate investment’s appeal 162

Sizing up real estate investment options 163

Conducting real estate investing research 167

Chapter 13: Financing and Putting Together Real Estate Investments 169

Financing Your Real Estate Deals 169

Achieving loan approval 170

Debating fixed-rate versus adjustable-rate mortgages 173

Deciding between fixed and adjustable mortgages 174

Finding your best fixed-rate mortgage 176

Landing an appropriate adjustable-rate mortgage 177

Understanding other mortgage fees 180

Finding the best lenders 181

Refinancing for a better deal 183

Working with Real Estate Agents 184

Recognizing agent conflicts of interest 185

Selecting a good agent 186

Putting Your Deal Together 188

Negotiating basics 188

Inspecting the property 189

Shopping for title insurance and escrow services 190

Selling Real Estate 190

Negotiating real estate agents’ contracts 191

Selling without an agent 192

Chapter 14: Taking Your Talents to the Small-Business Arena 193

Investing in Your Career 194

Deciding to Start Your Own Business 195

Weighing your options 195

Entrepreneuring at a company 196

Turning a Business Idea into Reality 196

Drawing up your business plan 196

Plotting to leave your job 199

Financing your business 200

Considering Small-Business Investment Options 202

Buying an existing business 202

Investing in someone else’s business 203

Looking at franchises 204

Beware the pitfalls of multilevel marketing companies 205

Chapter 15: Exploring Other Investment Vehicles 207

Considering Gold and Other Precious Metals 207

Contemplating Collectibles 209

Understanding the allure of collectibles 210

Seeing the realities of collectibles and their returns 210

Considering advice on buying collectibles 213

Understanding Annuities and Cash-Value Life Insurance 214

Availing yourself of annuities 214

Considering cash-value life insurance 214

Part 5: The Part of Tens 217

Chapter 16: Ten Things to Know about Investing Resources 219

Get Educated to Discern the Best from the Rest 219

Beware “Free” 220

Understand the Influence of Advertising 221

Value Quality over Quantity 221

Know How to Check Out a Resource 222

Beware Hype and Exaggeration 223

Don’t Assume Quoted Experts Know Their Stuff 223

Investigate Gurus’ Claims 223

Don’t Believe Investment-Newsletter Claims 224

Check Out and Keep Up with My Favorite Resources 225

Chapter 17: Ten Essential Tips for Investing Success 227

Regularly Save and Invest 5 Percent to 10 Percent of Your Income 227

Understand and Use Your Employee Benefits 228

Thoroughly Research Before You Invest 228

Shun Investments with High Commissions and Expenses 229

Invest the Majority of Your Long-Term Money in Ownership Investments 229

Avoid Making Emotionally Based Financial Decisions 229

Make Investing Decisions Based on Your Plans and Needs 230

Tap Information Sources with High Quality Standards 230

Trust Yourself First 230

Invest in Yourself and Others 231

Chapter 18: Ten Things to Know about Investing Apps 233

Beware of the General Dangers of Putting Apps on Your Cellphone 234

Use Apps Only from Proven Companies with Good Reputations and Longevity 234

Consider the Alternatives to an App 235

Use the Best Personal Finance Apps to Have More to Invest 235

Be Skeptical of Investing Apps Offering “Free” Trading 236

Review Current and Historic Financial and Economic Data 237

Invest with Leading Fund Providers 237

Tap into the Best Investment Brokerage Firms 238

Examine the Best Real Estate Apps 238

Seek out Good Small-Business Apps 238

Personal Finance in Your 20s & 30s 239

Bonus: The Lowdown on Health Insurance 241

Making Sure You’re Covered 242

Transitioning your coverage 242

Seeing how the 2010 healthcare laws (Obamacare) changed your coverage 243

Trumpcare? 244

Finding Your Best Health Plan 245

Selection of doctors and hospitals 245

Plan benefits and features 246

Shopping for Health Insurance 246

Uncovering the best policies 247

Handling insurance rejection 248

Health Savings Accounts: Tax Reduction for Healthcare Costs 249

Index 251