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5 Ways to Make Investing Easy

Robert Berger
How to become a day trader

Personal finance is far more complicated today than it was just a few decades ago. Growing up in the 1970s, my parents didn't have to worry about their credit score, which cellphone, cable and Internet package to choose, or whether to open a home equity line of credit (very few ever did back then). MasterCard was called Master Charge (it was renamed MasterCard in 1979), and most families I knew didn't carry a general purpose credit card anyway.

My, how times have changed. With the decline of employer-sponsored pensions, everybody has been pushed into the role of investor, whether we like it or not. Yet many people are intimidated when it comes to investing and terrified of the ups and downs of the stock market. In fact, a lack of understanding about investing is why many people - particularly the 20-something crowd - are afraid to even begin investing.

What many don't realize, however, is that investing can actually be straightforward and simple. The key is to choose an investment option that operates relatively simply and that you understand. This is easier than you may think.

These five investing options are a great way for new investors to begin:

1. Invest through your employer.

If your employer offers a 401(k) - or 403(b) if you work for a nonprofit - it's a great opportunity to start investing. You can set up a contribution amount that will automatically be deposited into your 401(k) account each payday. In most cases, you can begin investing with just a few dollars per paycheck, even if the mutual funds you are investing in have high minimum investment requirements.

With most plans, you can also speak with an adviser who can help you pick the best investing options given your financial goals. And some will also contribute to an employee's 401(k) as part of an employer matching program. If so, be sure you understand exactly how your employer match works to take full advantage of this benefit.

2. Consider another retirement account.

If you don't have a 401(k) option or want to invest more in a tax-advantaged retirement account, consider opening an individual retirement account. Both Roth and traditional IRAs can be a good option. When you invest in an IRA, though, you will have to choose what that money is invested in. The IRA is simply the vehicle through which you invest the money and get tax advantages. When you open an IRA with a company like Fidelity or Vanguard, you can seek advice from their investment advisers about where to invest those funds.

3. Use a service like Betterment.

Betterment - and services like it - makes investing easy by picking investments for you. When you sign up for this service, you simply indicate your investment goals and how much of your investment you want in stocks and bonds, and Betterment does the rest. You can easily change your allocation in the future, or take advantage of Betterment's tools for more guidance.

Last year, Betterment reduced its costs, making it a viable option for first-time investors. You can also take advantage of Betterment's IRA option for an easier way to make choices about your IRA. Services like this can streamline the investing process for beginners, or those who don't feel confident enough to do it alone.

4. Invest in a Standard & Poor 500 index fund.

An S&P 500 index fund offers instant diversification at extremely low cost. Unlike an actively managed mutual fund, in which investment advisers research and select stocks to include in the fund, an S&P 500 index fund invests in every company in the S&P 500. For example, Vanguard offers this type of fund (called the Vanguard 500 index fund) and charges just 0.17 percent of invested assets.

Furthermore, there are no brokerage fees when you invest in the fund directly with Vanguard, and many major mutual fund companies offer a similar option. Plus, recent studies show that index funds beat most actively managed mutual fund options.

5. Pay down debt.

Here's one way to invest that you probably weren't expecting: pay down debt. Particularly if you have high-interest credit card or other debt, paying these balances quickly can be one of the best investments you'll ever make. Not only are you reducing future interest payments, but you are also avoiding the risks that come with the stock market and other investments.

This calculator from MSN Money can help you see if you're better off investing or paying off debt. Often, once you get your highest interest debts paid off, a blend of investing and paying down debt is a good option.

Rob Berger is the founder of the popular personal finance blog, the Dough Roller.

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