Starting Out Right

Question of the week:I've wanted to start investing for some time, and I figure with the market down like it is, I might as well get started. But I want to be sure to do it right-what's your advice for me? --J. Lins

Dear J.,

Kudos to you for not letting these tough days in the market discourage you from starting a long-term investing program. In fact, your courage to forge ahead during a down market is the mark of a savvy investor.

We asked the seasoned investors in the Armchair Millionaire community about suggestions they'd offer to a beginners and heard these nuggets of wisdom:

"Stay invested at all times. Trust yourself on making your own investment decisions, especially now when everyone is so negative about the stock market." --Ka-Wai W.

"Sign up for your company's 401(k) immediately and invest as much as you possibly can in it." --D.F. Colson

"Have a clear list of goals in mind (like a house or retirement) and the cost and time frame for each one and then begin saving for each one methodically." --Paula

"Dollar cost average! It's really simple. Decide on a dollar amount that you're comfortable investing on a monthly basis and then invest that amount into a mutual fund. If you start when you're young, you'll actually hope that the market goes down because you'll accumulate more shares each month." --Joe L.

But before you plunk down money for your first mutual fund, make sure that your financial house is in order. My checklist will help.

The Armchair Millionaire Checklist for What to Do Before You Invest

• Pay off credit card debt. When you pay off a card charging you 17 percent annual interest, it's like getting an immediate, tax-free, 17 percent return on your money. That return is far better than you'll get by investing, so don't pass it by.
• Create an emergency fund. Have a safety net of cash to help you through the unexpected, such as a major house repair or losing your job. The equivalent of three month's worth of expenses is a good figure to shoot for, but look at your own situation and spending habits to arrive at an amount that's right for you.
• Protect what you have. A major illness or disability could wipe out your investments if you're not properly insured, so if you don't have health and disability insurance, get it. If you own a home, check with you insurance agent to make sure that your homeowners' coverage is adequate. If you have dependents, think about term life insurance so that they'll be taken care of if you were to pass away
• Know where you want to go. Nothing will get you on track and make sure you stay there more effectively than clear goals. Decide what you want to achieve through investing, when you want to have it, and exactly how much you need to invest now to get there.

THE BOTTOM LINE: The strong growth of the average American's portfolio during the late 90s lulled many into a false sense of financial security. But now we're faced with a rocky market, it's time to get back to the fundamentals of sound investing and comprehensive financial planning.