Money·5 min read

theSkimm’s Guide to Making your Money do the Work

Jan 1, 2019

The Story

It’s 2019 and it’s time to bring your ambition to your resolutions. Time to tackle investing, which can be intimidating. We've partnered with Vanguard to break it down for you.

Ugh. How do I get started?

Start by making sure you’ve got savings in place. As in make sure you have money put aside in case of emergency, like if your car breaks down, or you need your appendix removed, or even for that emergency pair of shoes you've been needing (just kidding). But really, emergencies can be a big deal and a huge strain on your finances – so make sure you have that cash money set aside. No, not stuffed into a box underneath your mattress. In da bank. Once you’re in a good place savings-wise, you can slowly start to trickle over to investing. This means you’ll be putting your money somewhere else and watching it grow. Most savings account have a pretty tiny interest rate, so your money may not grow that much over the years. Investments are usually riskier than savings but they can pay off way more in the long run…when done well.

What do I need to know?

Here are some of the things you will need to be an expert in the basics of investing:

Bonds…as in a way for a company or the gov to raise money. Here’s the basics: bond holders lend money to investors, who then receive a fixed amount of interest. Investors get the initial investment back at the end of the loan (except if the company bombs).

Stocks…as in when you own a little part of a company. Owning stock gives you the right to participate in company earnings (and losses) through dividends and/or changes in market price.

Broker-dealer…as in you’ll need to help you buy or sell publicly traded stocks, bonds, or other common investments.

Fiduciary…as in an investment advisor that’s registered with a government entity (think: state agency or the SEC) obligated to act in their clients’ best interests, rather than their own. 

Hedge fund…as in the country clubs of investing. You have to have a lot of money to get in, and a lot more money to stay in. These funds use a ton of pooled money to invest in different kinds of investment strategies, many of which involve higher risk.

Mutual in instead of trying to pick your own stocks and time the market, you can hire a human much more experienced to pick a bunch for you. Mutual funds are made up of many stocks, bonds, or both. They’re professionally managed by investment firms. Sometimes they’re focused on a specific category of company, other times the firm tries to pick the companies they believe will perform the best. You may see mutual funds as investment options in your 401(k) at your job. But you can also buy into mutual funds on your own.

ETFs…as in Exchange-Traded Funds. Like mutual funds, these are made up of a combo of things. Most are set up to focus on a specific category of companies. They typically have lower fees and also typically have no or low minimum investment amounts, so you can get started ASAP.

401(k)…as in investing for your retirement. It can be employee-sponsored, and with a traditional one, you’re putting pre-tax dollars into it – which can lower how much you owe in taxes right now. But you’ll pay taxes on the money when you withdraw it in retirement. Some companies will match the amount you contribute, with limits. This will be waiting for you when you retire.

IRA…as in Individual Retirement Account. Also an investment for your retirement. You can put a few thousand dollars every year into these – and decide how you want to invest it. If you do a traditional IRA, you don’t pay taxes on the money until you take it out. If you do a Roth IRA, you’re paying the taxes from the start. There are no income limits that prevent you for a traditional IRA. However, how much money you make in a year has a direct effect on how much you can contribute to a Roth IRA.

Ahhh, tell me about the stock market.

Here’s a quick primer on what you’ll want to remember: The Dow Jones Industrial Average (aka the DJIA, “Dow Jones,” and “the Dow”) is the best-known stock index in the US. Basically just a list of 30 big-name stocks traded on either the New York Stock Exchange or the NASDAQ. It’s price-weighted, meaning that stocks with higher prices are given more importance when calculating the overall average. Then there’s NASDAQ (aka NASDAQ Composite): an index that has every stock listed on the Nasdaq stock market. Since there’s a lot of tech firms, it’s a temperature check of the financial health of tech and growth companies. do I jump in?

Talk to an expert about where and when to start, as well as what type of investment is right for you. Have this guide handy so you know what the pros are talking about when they mention Roth IRAs or mutual funds. Make sure you’re making informed choices.

Any last minute advice?

Add this to your to-do in, start new habits that help you make sure you save enough money to start investing. Call your bank to set up an automatic transaction that will take just a little bit out of every paycheck. If you get a pay bump, pump up the amount being taken out.

Look at all the in when you start investing with a broker-dealer or an investment advisor, they will most likely charge a fee for their service. And there may be other hidden fees tacked on to what you buy, so don’t be afraid to ask how much you’ll be charged. You’ll never regret having asked the question.

Spread your in diversify, because you shouldn’t put all your eggs in one basket. Typically the sweet spot is a low-cost, well-diversified investment portfolio.

Timing is in you may be able to afford being more aggressive with your retirement portfolio when you’re young because if something goes wrong, you may have time to make up for losses before you retire. You can get more cautious as you go.


It can be intimidating to get started on investing but the new year is a good time to do it. Get into it. Bring your ambition to the table. And never be scared to ask questions to the experts.

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