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Where do I start when I don't understand the basics?

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  • Where do I start when I don't understand the basics?

    Hi all,

    Thanks in advance to those who take the time to read and respond to this.

    I grew up fortunate and quite naive about money. I would like to make the most out of my money, but I fear I still don't have an understanding of the basics. I have already read the WCI book and have been listening to the WCI podcast for over 50 episodes. But there are some words and phrases used that I still don't have a grasp of.

    For example, I think I understand what stocks are (portions of ownership of companies out there that have a value based on what someone is willing to pay for it), but don't quite understand what a bond is and how/why there are different kinds of bonds (municipal, treasury, etc) and why bonds seem to be protected when the stock market goes down. I don't understand other phrases like "ordinary income tax" vs "capital gains tax." What is the difference between an index fund or a mutual fund or an ETF? What is a dividend?

    I feel like by reading the WCI book and listening to the podcast, I certainly know more now than I did a year ago, but I fear my future knowledge growth will be stunted unless I really grasp some of these basics. Are there any books that are recommended out there that can teach me a little bit more about the basics?

    Thank you!

  • #2
    WCI has a bunch of beginner posts under the Start Here button on his web page.

    I found the PoF site very valuable as well.

    Bogleheads guide for investing really helped me out in the beginning.

    Welcome and good luck


    • #3

      Are there any books that are recommended out there that can teach me a little bit more about the basics?
      Click to expand...

      bogleheads. read the wiki. read the books.


      • #4
        I would re-read the WCI book again because your questions are very basic. I haven't read the WCI book myself but if you are asking questions like what is ordinary income tax and capital gains tax, you can even look that up on wikipedia and it's correct over there too


        • #5
          There's a blog.


          • #6
            BogleHeads is pretty popular, focuses on mutual funds and investments; it's based off of the philosophy of the guy who started the Vanguard Index Funds


            • #7
              The simple path to wealth or any Mike Piper book or Johnathon Clements book. All these are simple to read.


              • #8
                actually WCI's blogpost today lists the books that you should read. I would start with that, then the forums/blogs/podcasts will make more sense. it takes time to learn, don't be bummed that you don't know it all already.


                • #9
                  I wrote two posts outlining investing basics:

                  Investing Basics for Physicians With Little Time or Experience, Part I

                  Investing Basics for Physicians With Little Time or Experience, Part II



                  • #10
                    A bit embarrassing, but I actually read "personal finance for dummies". Not a bad book, if I remember correctly, it was many years ago. You really need to understand the basic terms (mutual fund, roth, ira, etc) before you understand the advice. If you don't feel like messing with it, you might want to just meet with a fee only financial planner once in your life. As long as you don't end up with some whole life salesperson, I feel like a lot people would save a lot of money/earn a lot more money if they met with someone reputable early in their career.


                    • #11
                      You should realize that while it’s important to expand your general knowledge base because you don’t know what you don’t know, at the same time it is okay to define what aspects of investing you don’t need to understand right now. For example, if you are a resident and don’t have a taxable account, you don’t have to worry about understanding capital gains taxes at this point in your investing career. I am a DIY hobbyist and there are plenty of topics I can’t explain or teach (hedge funds, commodities, EE bonds, etc).


                      • #12
                        Google "if you can" by William Bernstein. Short and sweet. If you cannot make it through that then hire an advisor.


                        • #13
                          Another vote for the Bogleheads wiki.

                          I learned a lot by not looking things up. Once your here (& for me) long enough you pick up these things without realizing. Don't make it a chore. And there (probably) is no rush. Just keep consuming content.
                          "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓


                          • #14
                            There are two different aspects to mentioned.
                            • Terminology
                            • Basics of financial planning

                            Do you have an Investment Policy Statement?
                            That should be your deliverable. You have a goal. Look it up and begin your education.
                            Make an outline and begin filling the gaps.
                            Everyone has a different learning style and interest. Keep it simple. Research terms, options, and strategies AS you are building it.
                            Google the words you done understand completely. Your example was stocks vs bonds.
                            As you work towards the IPS, the is a direction and purpose in your learning process. Google and the internet has given YOU the ability to write your own book, your IPS.
                            Your research may lead to books, blogs, Vanguard and Fidelity education materials, posting specific questions and getting answers.
                            •For example, retirement plans. You want an overview but focus only on what is available to you. Understand your options and how to contribute, how to invest, and how fund’s come out and the tax implications. Done, you got that.
                            You don’t need to be an expert, you got the basics.
                            • The purpose is to limit reading and knowledge accumulation to exactly what your priorities are.



                            Your reservoir of knowledge will grow exponentially.


                            • #15
                              Read the pdf. If you can by bernstein
                              all the info you will need and sources fir addl reading
                              its 14 great pages
                              this is simple stuff
                              you should later read books by Bogle, slkiel, Bernstein and Swedroe and you will be an expert