There's No 'Perfect Time' to Dive Into Investing
Andrew Leckey

Many would-be stock investors are awaiting a perfect storm.

That is a miraculous time when prospects for gains are outstanding, prices are reasonable and risk is minimal.

They shouldn't hold their breath. In 2008, stock prices were low but prospects dim as our financial system teetered. Gains in 2009 were a rebound from that low point but came as a surprise. In 2010, Europe's financial weakness has shocked the world.

What's a novice investor to do? Stop waiting for a sign, say the experts. To be serious about investing, make it a regular part of your life as soon as possible because it is a long-term commitment.

"There's really never a bad time to start investing," declared Charles Carlson, editor of the DRIP Investor newsletter (www.dripinvestor.com), Hammond, Ind., that focuses on stock dividend reinvestment plans. "The biggest hurdle for people of any age is their concern that they're getting into the market at the absolute worst time."

History shows that over time, stocks will trend upward, he said, so the greatest success comes from exploiting the power of time and that is done by getting into the game as soon as possible.

"In the short term, it may be a bad time but it will change," Carlson said.

You can start at any age and won't have missed the boat. A 50-year-old probably has another 25 to 30 years ahead, which a long time for money to grow, he said. At 55, you may want your stock portion to be more defensive (blue chip) than aggressive, he acknowledged, but that doesn't mean a diversified portfolio can't have a smattering of smaller growth stocks.

"This is a good time for a young person to get into the market," said Mark Salzinger, editor and publisher of The No-Load Fund Investor (www.noloadfundinvestor.com), Brentwood, Tenn. "Get into a disciplined 'pay-yourself-first' plan in which you regularly put a dollar figure in a good growth stock mutual fund."

As your income grows, you can invest more and during the down market periods you'll be able to buy more stock, he reasoned.

"There are lots of side issues, such as European debt, but you have a good situation now in regard to equity prices in the U.S. with very low interest rates," Salzinger said. "Company earnings are improving and the economy is getting better, but there's still a lot of money on the sidelines."

The bullish argument is a stronger one now than the bearish one, he believes.

"A 40- or 50-year-old who has never invested before is likely to have a very low risk tolerance because they otherwise would have been the market years earlier," said Salzinger.

Vanguard Star Fund (VGSTX) is great for such beginners because it provides a diversified portfolio in a single shot, said Salzinger. That "fund of funds" invests in 11 Vanguard funds of various styles and managers to build a diversified portfolio that is 62 percent stocks, 25 percent intermediate- and long-term bonds and 12 percent short-term bonds.

The "no-load" (no sales charge) Vanguard Star is up 24 percent over the past 12 months and has a 10-year annualized return of 5 percent. It requires an initial minimum investment of $1,000 and has a low annual expense ratio of 0.37 percent.

A balanced fund of stocks and bonds is a typical starting point. Among stocks, first-time investors also can choose from many funds, with those based on the Standard & Poor's 500 Index or broader stock indexes some good examples.

Diversification, which leads to less volatility and steadier returns, involves building a portfolio of stocks and bonds with variety even within each asset class. Most funds permit investing with a relatively small amount. Investors with larger amounts typically add individual stocks or bonds.

Here are steps to becoming a savvy beginning investor:

-- Write down your key financial goals and the years in which you hope to achieve them. This could include retirement, college or a home. Quantify how much each goal is likely to cost.

-- Pay down as much of your debt as possible to make it manageable. Track your expenses and spending habits to see where exactly your money is going. Put aside liquid investments such as money-market funds or bank accounts for emergencies.

-- Use "dollar cost averaging," the strategy of investing a set amount come rain or shine. This lets you take advantage of down periods along the way to invest at lower prices. The amount should be reasonable but significant.

-- All investing involves some risk and you should determine how much you're willing to assume. If you're a worrier, aggressive choices aren't for you. Yet everyone should include some higher-growth choices for at least a portion.

-- Learn as much as you can about mutual funds, exchange-traded funds, stocks and bonds in publications, online and books. Don't be wooed by the prior year's winning choices. Check out longer-term track records of three, five or 10 years, as well as volatility.

-- Make your selection or selections and stick with them awhile. Monitor regularly but allow some time to see how the investment and markets are doing. Keep investing on a regular basis and don't try to time the market, which rarely works.

Available at Amazon.com:

The Seven Deadly Sins of Investing: How to Conquer Your Worst Impulses and Save Your Financial Future