A Terrified Person's Guide to Investing

Worrying if you're investing your money in the right places can keep you up at night, especially when all your money is stored under your lumpy-ass mattress. But investing is nothing to wet the money-stuffed bed over. In fact, it doesn't need to be scary at all. To help demystify it, we spoke to Sophia Bera, a certified financial planner and founder of Gen Y Planning. She's given us some basic tips on how to start investing, and how to make sure you won't get swindled.

Investing doesn't mean buying a stock on a hot tip from your mom's brother's wife's friend Chuck. Instead, do these things: make sure you have "at least three months of net pay saved for emergencies." Also try to pay off any high-interest credit card debt (Bera defines that as anything over a 5% interest rate). And lastly, stack your cash in retirement accounts. Contribute via each paycheck to a 401k if your employer offers it, and also to a Roth IRA. We'll talk more about that later. That's a lot of stuff to accomplish before you dive into any other type of stock market-type investing, so slow your roll, Jordan Belfort.
 

Turns out that the NBC commercial you saw between scenes of Saved by the Bell was right. The more you know, the better! Educating yourself will make investing less scary, and there are a couple of good ways to get yourself up to speed. Bera recommends Investopedia as a trustworthy source to help define any financial terms you come across that don't make sense. She also says to stop by Morningstar to help investigate important info like what the expense ratio is on certain mutual funds, and past performance of both funds and stocks. Bera also came up with 17 investment terms worth knowing, including plenty of the ones we talk about here.
 

While plenty of people invest their own money, there are definite benefits to working with a financial professional. First and foremost, they know more than you. Unless you've also gone through the training and experience required to become a certified financial planner, in which case, congrats! So here are some things to look for when choosing someone to work with.

One, is the financial adviser paid through commissions or are they fee-only? That is, do they get a commission when they invest your money in certain mutual funds? Sounds like that could be a conflict of interest, so ask them how they get paid. Many fee-only advisers take a flat monthly fee. Second, are they a certified financial planner? Working with someone who has a "baseline in terms of education and training" is a good idea. And lastly, are they a good fit for you personality-wise? "You should work with someone who you feel comfortable with sharing intimate details of your financial life with," Bera says.

If you're looking for a financial adviser, Bera's part of the XY Planning Network, which can help you find a fee-only CFP to help you get your money right.
 

Stocks and mutual funds go up and down. That's the reality of investing -- you're not always going to make money. That said, hyper-focusing on how your investments are doing is also a mistake. "Don't obsess over it," Bera says. "Let's say you buy stock: once you make a purchase, stop looking at the stock value every day. It's going to make you crazy. People are upset their accounts are down 2% -- it's okay, it's [only] been six months!" Keeping yourself informed is one thing, but tinkering with your investments nonstop is a good way to give yourself a nervous breakdown.

And if you do go down the path of investing in individual stocks, know that you're essentially gambling. "It's exciting," Bera says. "It can be cool when you buy a stock to watch it go up. But know that there's risk involved. Some [stocks] go up and some don't. Ultimately over the long-term, some don't do well. Some companies go out of business. It's important to understand that there are risks involved. [The key] is building a diversified portfolio."

The point of investing is not to throw all your money in the stock market and make enough cash to buy a Bentley next month, even though that would be baller as hell. Rather, it helps to have a long-term plan to grow your money. "The best place to start [investing] is in your 401k plan at work," Bera says. "Oftentimes because you may get a company match." Many companies offer to match every dollar you put into the 401k up to a certain amount. That's beautifully free money.

If you can't get a 401k through your job, you can always sign up for a different kind of retirement account, called a Roth IRA, through a company like Vanguard. Once you put money in your Roth, you have to pick something to invest it: a Roth is basically a holding pen/tax-free zone for your money, not an investment itself. Once you have a Roth, Bera advises a "passive investment approach." That entails investing for the long-term. "I recommend [buying] low-cost index funds and target-date funds," she says. Those funds are a mix of stocks and bonds all wrapped up into one convenient investment. As another bonus, low-cost funds don't charge you a ton of fees to own them.

After you've got all your retirement contributions set up, Bera recommends investing via a site like Betterment. Unlike when you buy mutual funds through a discount brokerage on your own (like through Vanguard), there are no minimums to investing through the site, and it can automatically pull funds from your bank account and into different investments of your choosing. You also don't pay a fee every time you buy through it, and you get to take advantage of dollar-cost averaging, an investment strategy that will hopefully work in your favor. "I use it with all my clients," Bera says. "You can choose a stock and bond asset allocation, and all the underlying funds are Vanguard ETFs [exchange-traded funds]."

That's right: sometimes you need to invest in the stock market that is your life. "The best place to invest, especially for young people, is yourself," Bera says. "Invest in a course that's going to teach you a specific skill that's going to allow you to get paid more. Invest in starting your own side business so you can pick up extra work." Bera notes that growing your career or business can have a huge impact on your long-term financial situation. In fact, thinking about how you're going to increase your earning potential "is going to pay off more than a $100 gain in your stock account."

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Lee Breslouer is a senior writer for Thrillist, and invested $5 in coffee today. Follow him to good choices: @LeeBreslouer.