Introduction to Investing

Finance and Investing

Why Should I Invest?

Independence - Financial independence, while not the key to happiness, is essential to attaining independence. For women, who have historically depended on others for financial support, this is an especially compelling reason to consider learning how to invest.
Intellectual curiousity - The world of common stock, currency exchange rates, and Sallie Maes is most often very foreign and confusing to the laywoman. Educating oneself about this complex and dynamic world can be intellectually satisfying and rewarding.
Pay Off Loans!! Pay Off Graduate School!! - The time when savings were tucked under the bed or preserved in a banking account are long gone. Learning how to make the best use of your savings may mean the difference between being in debt and paying for your education. Having chosen to attend Wellesley, you know that education is a good investment. Invest in it!

Novice Introduction

Invest Early and Long-term!
It has been widely agreed that investing over a long period of time will yield good returns and the earlier the better. Trying to "beat the market" and invest for the short-term gain is more risky and more controversial. Of course, with risk comes the potential for more reward. The best course of action is to determine an investment plan, to reconcile your investment goals (i.e. paying for a car in five years, buying a stereo tomorrow, financing your home in ten years) with your financial situation and to stick to this plan.

Self-educate!
Don't be intimidated by the wealth of information and suggested strategies. Everyone, from the professional investor to amateurs like yourself, will claim some new perfect understanding. Investing 101 is an on-going independent study whose foremost purpose is realizing your own investment game plan with relevant information and an appropriate strategy. This is not to say that you should ignore the books in the "Personal Finance" section of almost any chain bookstore or the words of advice of others. SEEK OUT INFORMATION. Use this web page including the recommended reading for novices, and the links. DISCUSS WITH OTHERS. Come to our Sunday roundtables and learn with your peers through engaging discussion and sharing of investment knowledge.

Strive for Your Philosophy!
There is no "right" philosophy so pick one you are comfortable with or develop one of your own. There are three noteworthy philosophies of investing. Professional investors, who are paid for the success of their technique, tend to subscribe to either fundamental or technical analysis. Technical analysis is a rule-laden study of security price patterns in the past, while fundamental analysis looks at the company's financial condition, management and competitive position in its industry or sector. In the case of deciding whether to invest in a stock, a fundamental analyst might look at a company's annual report while a technical analyst might look at a chart of the stock's price movements in the market within the last three months. There are obvious differences between the two philosophies. For example, a technical analyst might buy the stock if its price was rising over a period of time because she believes it will continue to rise, while a fundamental analyst might choose to sell that same stock because she believes the market is overvaluing the stock and it will fall again soon. Some academics have rejected the notion of technique altogether and have asserted a third philosophy most commonly referred to as the "Random Walk Theory". This asserts that anyone may receive the same return as "professional" investors by merely throwing darts at the "Marketplace" section of the Wall Street Journal, or randomly picking securities!

Mock Investing
A great way to learn how to invest is to practice, right? Check out the online "2000 Stock Market Game" run by the Boston Globe here!