Your first consideration should be 6-12 months of living expenses in a bank or money market fund to cover unforeseen emergencies such as a job loss or large car repair.
You don’t want to risk having to sell an investment at a loss to cover an emergency.
Next, if you have interest bearing debt, you should pay it down as quickly as possible. For instance, if you pay off a credit card with 18% interest, you have effectively earned a guaranteed 18% return. You have no such guarantee in the stock and bond markets.
Once you have taken care of the two above steps, it will
be time to invest. According to CNBC’s Cramer, your first $10,000 in investable funds should be applied to an index fund before you invest in individual stocks.
One of the best index funds you van buy is the Vanguard Total Stock Market Index Fund. The ticker symbol for the mutual fund is VTSMX: the Exchange Traded Fund (purchased through a brokerage a count) symbol is VTI.
Good luck,
Marketstar
