CEDAR VALLEY BUSINESS MONTHLY
You don’t have to be ‘rich’ to start investing In my over 33 years in the investment brokerage business, probably the most frequently asked question I have received is some form of “I know I should do Gary L. Glawe some investing for retirement, but I is owner of Glawe Investment do not have much money — so how Services Inc. in Cedar Falls. do I start?” Contact him at There are some 277-6043 general princior (toll-free) ples that apply to at 800-723-2310. everyone — and everyone should be saving for retirement. ■ You do not have to be rich. ■ It does not have to be complicated. ■ An investment broker can help you.
Use free money In most situations, a ﬁrst step in investing is to take advantage of any 401(k) plan offered by your employer. Employees should contribute at least enough to take maximum advantage of any matches their employer makes. Many employers will match up to 2 or 3 percent of a person’s salary. The match is essentially a raise and free money. This should be the ﬁrst investment for most novice investors. You will have to make some choices, but do not let this deter you. Company personnel or investment brokers can help sort out your options so your money can grow over time.
Invest your own money Once this investment is made, starting an IRA contribution would be a logical second step. People who receive a W-2
form are eligible in most cases to contribute up to $5,000 for 2010 and if over 50 years old, $6,000 can be contributed for tax year 2010. You can open IRA accounts with as little as $250 with many mutual fund companies, and it can be added to in amounts as small as $25 a month. This contribution can be made until the time taxes are ﬁled, so in theory a person has until April 15, 2011, to make a 2010 contribution. There are several types of IRAs. A traditional IRA brings a tax reduction immediately when ﬁling your tax form. The alternative is a Roth IRA, where taxes are paid on the funds invested in the current tax year, but no taxes are paid when the money is taken out. New investors can consult a competent investment broker to learn the
nuances of each type of IRA account. For self-employed investors, there a type of IRA account known as a SEP-IRA. Your contribution is based on your income. A tax adviser can tell you how much you are allowed to invest each year The same choices of investments can be made into the SEP-IRA, as for a regular or Roth IRS. An investor has a choice of several types of investments to put into an IRA. In most cases a selection of mutual funds allows for more diversiﬁcation of investments to be included in the account. If a person wants to select stocks on their own to deposit into the IRA, it can be done, but unless a person is investing at least $1000 or more at a time, commission costs can become more prohibitive. .
Branching out after that Once basic plans are established, an investor has many choices when making investments outside of retirement or education plans. These range from conservative to speculative. Investments can range from stocks, to bonds — either corporate or municipal — to mutual funds to exchange-traded funds to tax shelters to commodities. Consulting with an investment adviser would help in making the determination of how much risk you are willing to take, what the likely rewards will be, time horizons and tax implications. This article was not intended to give all the answers, but to establish that one does not need to be “rich” to get started. The sooner you start, the better, There are choices that are quite simple to get started.