Your Money: The Missing Manual

Chapter 12. An Intro to Personal Investing

"Investment performance doesn’t determine real-life returns; investor behavior does.”

—Nick Murray

Wall Street is filled with jargon and with folks like Jim Cramer shouting at the TV camera, telling you to “Buy! Buy! Buy!” and “Sell! Sell! Sell!” But when it comes time to invest your money, it’s hard to know where to start. Stocks? Bonds? Commodities? And what are those things exactly, anyway?

Investing doesn’t have to be complicated. In fact, the investing method covered in this chapter—a method recommended by Warren Buffett and scores of other investment pros—takes just a few hours up front, and then a few hours a year thereafter. This method offers solid returns and you don’t need a degree in finance to understand it.

As you’ll learn in this chapter, smart investing is simple but not easy—human nature gets in the way. And before you invest a penny, you should understand some essential terms and concepts. Let’s get started.

Note

This chapter gives you the basic info you need to get started with investing. For a closer look at investing and to learn more great strategies, check out Bonnie Biafore’s Personal Investing: The Missing Manual. As with all things financial, the more you know, the better.

Why Invest?

Chapter 5 taught you how to spend less on many kinds of things, and Chapter 6 suggested various ways to increase your income. Together, these two steps can lead to positive cash flow and a monthly surplus of money that can improve your life. ...