5 Types of People Who Should Not Invest

Nicole Lapin discusses the reasons some may not want to invest now.
5:24 | 02/29/12

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Transcript for 5 Types of People Who Should Not Invest
Every I'm Tory Johnson is at work. Opening for a -- taking the first step toward -- secure retirement. But despite what some financial planners say investing is not for everyone. Knowing what to invest is just as important as knowing how to invest. And here to Phyllis and what we need now is our financial expert called lap and pain call -- during periods of the our favorite. Recession -- data are -- -- now as things you know it's very rare to be steered away from savings steered away from investing your 401K. So why should we pay attention here why should -- -- -- hey hey it's not for everyone. What hey hey actually it is more a lot of people but it might not be specifically for you saying you're gonna wanna look at your own financial make up to decide whether or not and -- as a forum in a 401K is for you. So. Some of the people who perhaps will recognize themselves and should say you know what this isn't for me I shouldn't be investing for a one came right now what -- you should invest in and -- -- farmers in a rainy day fund. Three just six months and that rainy day fund of four and one was seen circumstances. Is typically what we -- -- recommended before the recession. Now in the -- of the economic recovery six to nine months. Of just some money is sent a sign that is liquid able to Kong team right away at a moment's notice is what you should really be focusing on so that's number one that type of person. -- your company number two doesn't match her for a wedding -- contributions and in this economic recovery we arcing a lot of companies. Backing off of that you're gonna want to think twice because they're not helping you. Double down. On that retirement investment and on for all it is investing in the market thirty to forty years from now in some cases is a little bit risky if your company is not helping you out. The third type of person is if you have a lot of debt and a good role of -- Is if you have 36%. Of a debt to income ratio you should be paying that down at first because not is going to accumulate. And really gonna get -- in the future. And report if you are saving for a home one of the great things and I do think we're on -- are great for so so many people. Of the great things is and that they offer. Penalty free withdrawals if you are first time home buyer. Worth if you haven't gone home. In the last two years -- that's only 101000 dollars so if that down payment is more than 101000 dollars are gonna get taxed twice this -- you're buying a home. And that's how the down payment is greater you're going to want to put that aside for -- and has sent a person at -- is if you need cash. Readily available you wanna look at some savings vehicles in this case and that -- genes in the world if you -- -- a little bit more impressive. -- a money market account but this won't let you. Debt not money at -- very quickly because you don't want you in car some of those four went. -- -- -- So it's very easy as we just heard -- very easy to come up with reasons. For why we can't invest that money. And for a lot of people it sort of like let's -- -- -- hot right I don't need to save and that's definitely not what you're telling us you're telling we do any day if we do things. So how -- and overcoming some of these hurdles to really get ourselves ready to invest what are some of the things that we might look at one. Telling you don't invest in a four Ellen and Alan shock things brain -- -- -- -- -- Muni bonds for example as a good investment vehicle let's get you about two and a half percent comparing to know that that you're -- -- in the money markets and also. Another benefit there is if you're investing in your own stayed and that's going to be interest rate. In those cases on a state and on the federal level and you wanna pay down that debt of ours because. Highest interest rate -- is going to be compounding -- as fast in some cases faster. And what you unsafe and and sent -- an emergency fund you never know what's gonna happen salary. Cut and job lots of moving expenses you're gonna wanna have that six to nine months as set aside and say -- scandal. This is one of the great psychology is about 401K if you don't see it coming out of your pay -- It doesn't feel as bad so on the fashioning -- -- we recommend your prices on an adult -- program in -- lets him get in. Under the typical 2500 dollars for about fifty dollars a month that allows you to buy more shares when their chain. And less when they're expensive and then lastly you want -- wants those fund expenses keep the stock funds to about one point 3%. The bond funds to about. Point 9% and stunning after a stunning Torre I don't need to tell you miss. Has shown that if you watch those fund expenses that is the surest fire way to increase -- Yes keep them and south. Aren't that you can go and -- go -- and being absolutely and you'll tell us. At recession -- dot com how weakest it's those dollars went -- shopping carrying Nicole thanks so much always fun to chat with you -- and firm more advice on. All things financial go -- and calls -- -- recession -- dot com.

This transcript has been automatically generated and may not be 100% accurate.

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