Allworth Advice: Looking to invest? How to start

Question: Carter in Wyoming: I have about $30,000 I want to invest in the market. What’s the best way to do this? If it helps, I’m 49.

A: First, we’re obliged to ask you to take a moment and think about your other financial priorities. Is your emergency fund fully funded (meaning it’s capable of covering about six months’ worth of critical expenses)? Do you have any outstanding credit card debt? Are there any other short-term goals that could use an infuse of cash? Because while the initial temptation may be to invest all of this money, you first need to make sure the rest of your financial life is in good standing. Think of it kind of like building a home: You want a strong, solid foundation before you start adorning it with any of the “flashier” elements.

Now, let’s assume you have that strong foundation. The best time to get into the stock market is when there’s been a dip in prices, since that’s essentially when stocks are “on sale.” However, unless you have access to a crystal ball, this is difficult to predict. That’s why something called “dollar-cost averaging” can be a worthwhile strategy. This involves contributing the same amount at regular intervals over an extended period of time. Doing so helps to “smooth out” the inherent bumpiness of the stock market since you’re buying at market highs, market lows and, at all the times, in between. Plus, this approach can be easier on your psyche – you don’t have to worry about when or how much to invest. You just stick with the plan, no matter what happens.

Here’s The Allworth Advice: As frustrating as it is to hear, there’s no one answer to the question, “How should I invest right now?” It all comes down to your individual needs and goals. But, generally speaking, if you do decide to invest a chunk of money into the stock market, we typically like the dollar-cost averaging strategy. And one more note: If you need any of this money within the next two to three years, it shouldn’t be in the stock market at all. Just keep that in mind.

Q: T.R. in Burlington: My son is 29 and still living at home. I’m also still paying for his phone bill, food, etc., and the occasional “emergency.” As much as I love him, I want this to stop but it’s hard to say “no.” Any advice?

A: We feel your dilemma. Every parent wants to do what’s best for their child – yet  sometimes, doing what’s best can be terribly hard! We’re glad you’ve come to the realization that it’s time to stop enabling his financial dependence on you. Because it’s not a good situation for either of you.

To start, it could be beneficial to list out every single expense you’ve helped him pay for over the last six months or so. After all, hard numbers are hard to argue with. (If you want to go the extra mile, calculate the potential lost interest that money could have made if it went toward your retirement.) Show these numbers to your son and explain that this is money you no longer have. Maybe this will help it all sink in.

Or, a different tactic is to ask him how much longer he thinks he’ll need your assistance. This puts the onus on him, not you. If he’s engaged in this conversation, then it’s time to start creating a timeline for milestones he’ll need to hit by a given deadline. You can also offer to provide nonfinancial support, such as helping him look for an apartment or utilizing your friends and co-workers for networking opportunities.

The Allworth Advice is that this is probably a time for brutal honesty. And stick to your guns. Remember, your son has decades to recover from financial setbacks and mistakes. You don’t.

Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Responses are for informational purposes only, and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Call 513-469-7500 or visit allworthfinancial.com.