First, the someone you "heard" is absolutely right--with the current low interest rates, you absolutely are losing money in a savings account relative to inflation. I shopped around, and my FDIC-insured (i.e. no risk) savings account is at a higher rate than almost any other savings and is only a 0.5% APR. That's small relative to the roughly 2% target inflation rate, and it pales in comparison to the ~5% current yearly inflation rate. 2020 had similar interest rates and a ~1.2% inflation, and that's probably the closest rates have been to matching inflation since the Great Financial Crisis except for 2015 (where inflation was reported at only 0.12%).MiddleMan wrote: ↑Fri Sep 10, 2021 12:31 pm I've thought about buying stocks for a long time, but have never been sure how to go about getting started. With interest rates so low, I heard someone say, I am losing money sitting in a savings account. Any suggestions for a complete newbie? I do have retirement accounts that invest in stock. Should I just add to those? Those are managed funds but I'd kind of like to buy into certain companies and keep the money there for about 15 years or more.
I think the next things to consider: Why do you want to buy stocks? Why "certain companies"? Investing, whether in stocks, bonds, real estate, or alternatives, should always be for a purpose and follow a plan in order to minimize the likelihood of your emotions getting involved. Emotional investing is often a recipe for disaster. Some examples of "why" include: saving for retirement, not losing to inflation when building a downpayment for a house (or car, etc), building an estate for your children, or to provide supplemental income currently.
That said, it's hard to give recommendations without knowing more about your situation. I gather from your profile that you're mid-50's, and you said in the OP that you're a newbie investor. From that, I'd start by saying you need to be very wary of individual stocks and taxes.
Individual stock picking is not an efficient way to invest. It very rarely is capable of beating the market (the "average" of all publicly traded stocks), and many people have squandered away their money this way. Even people that do stocks as their job and have for years/decades usually fail this way. Without insider information (which is illegal to use), the expected return from today for any publicly traded company is essentially the long-term average of the market--about 10.2%. For every big winner with Tesla, GameStop, Apple, or Amazon, there are several more people who lost big time with Enron, Kodak, or Gamestop (yes, on both sides) that you never hear about. Instead of individual stocks, buying a mutual fund or ETF that follows an index of stocks is much more efficient--same expected return with vastly lower risk. Think of it this way: buying VTSAX or VTI (Vanguard's entire-US-market Mutual Fund and ETF, respectively) will give you tiny ownership of over 3900 companies in one purchase. Likewise, buying VTIAX or VXUS (the international equivalents) gets you almost 7,600 companies. There is even the all-world equivalents (VTWAX and VT) that get one over 9000 companies in one go. It might be easier to describe this approach from a real-estate perspective: if one had $10 million to invest in real estate, would it be safer to invest in a single, really expensive house or spread out that money in ~25 places that varied in geography, size, style, and local/state taxes?
Speaking of taxes... Taxes on stocks can get tricky, especially on optimization. You have to deal with short- vs. long-term capital gains, qualified vs. unqualified dividends, wash sales, and likely more. I'm guessing quite a few Gamestop and AMC "winners" from several months ago are going to get a huge tax shock early next year... But there's a really easy way for newbie US investors to not have to worry about this--utilizing their tax-advantaged space. There are two main types of these in the U.S., traditional and Roth. Here's a little diagram for them:
Traditional: Untaxed Input → Untaxed Growth → Taxed Withdrawal
Roth: Taxed Input → Untaxed Growth → Untaxed Withdrawal
Essentially, neither Roth nor Traditional will EVER lose to a taxable account, as taxable accounts are "red" across the entire path. As long as you and/or your spouse have earned income in a given year, you can contribute to one or both of these with an IRA (even extremely high earners can effectively take advantage of Roth through a backdoor approach). Now which is better can be complicated (and actually unknowable since we can only guess at future tax rates), but either way is "winning" over doing neither. IRA contribution limits for 2021 are $6000 (for those 50 and older, it's $7000). Many people also have access to 401k's (or equivalents) through their employer (or a solo 401k if self-employed), and these work similarly but with higher limits. The issues with tax-advantaged accounts are the penalties for early withdrawal, but they're great if you're wanting to invest for retirement or for building an estate.
So without knowing any other details of your needs, but knowing you're a newbie investor, I think a good suggestion would be a target-date fund. These funds are designed with your retirement year in mind and combine domestic and international stocks and bonds to target an appropriate risk for your intended retirement...and the mix of them changes as retirement gets closer. For instance, Vanguard has a 2030 target-date fund that goes by the ticker VTHRX. That fund started in 2007, right before it got obliterated by the Great Financial Crisis, and yet a $10,000 investment in it in January 2007 would have been worth $27,420 at the end of August this year. That's the equivalent of a 7.12% interest rate. (See here for the plot.) These types of funds were absolutely intended for "newbies", and one really can't go wrong with them.
Wow, that was really long. Maybe next time I should just find a good intro article and link it.