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Financial experts tout investing (stocks, mutual funds) as the key to solid financial footing. How should I get started without being ripped off by an overcharging firm or becoming the victim of some Ponzi scheme? I’m clueless.


You sound cautious, not clueless, and there’s nothing wrong with that, as long as you’re not so cautious that you miss out on opportunities to safely accumulate wealth. Ponzi schemes are very rare. Apart from the one perpetrated by Bernard Madoff, can you think of any?
Overcharging isn’t all that common, either, when it comes to the nuts and bolts of investing. Thousands of mutual funds want your business, so costs are very competitive, and there are plenty of discount brokerages that offer very low commissions to trade stocks and sometimes have no cost at all to trade funds.
The stock market, despite the last difficult decade, offers higher long-term returns than almost all other mainstream assets – bonds, Treasury bills, gold. There are no guarantees, of course, but if you’re planning for retirement or for some other goal that’s years away, it would be cautious to a fault not to have at least some portion of your wealth in stocks.
If you want to keep things simple and ultra-safe, put, say, half of the amount you have available to invest into a mutual fund that replicates the performance of a broad stock index like the Standard & Poor’s 500. Most large fund managers offer one, and total annual expenses are typically two or three tenths of a percentage point. You can keep the rest of your assets in short-term government bonds or cash to avoid further risk.
The best way to buy a stock fund, or any investment, is through dollar-cost averaging, in which you put the same amount of money in each month or quarter. That ensures that you will accumulate more shares when prices are lower. Say you invest $500 a month in a fund. If it trades at $50 a share, you’re buying 10 shares. If the price goes to $45 next month, your $500 will buy 11.1 shares. Over the long haul, you’ll get more for your money.
-Conrad de Aenlle