Order of Investing Operations

Where should you start your investment process?

There are so many different investment accounts out there - 401k, Roths, IRAs, HSAs, 529s, taxable brokerages, ESPPs, life insurance, crypto, etc. If you are new to investing, it is overwhelming.

Well don’t worry, F’er has you covered.

We will show you our preferred order of investing - which accounts to start with and how much to contribute.

If you follow this guideline, you will max out your free money, diversify your taxes, and manage your risks.

This one is another banger, so lets get to it.

We can’t help you get an impractical transparent air screen…but you can rock the all-black suit while you read this and set up your accounts

Order of Investing Operations

If you went to school, you likely know the acronym “PEMDAS” or the mnemonic of “Please Excuse My Dear Aunt Sally”. This is used to help children remember the order of operations when looking at a formula.

1. Parenthesis

2. Exponents

3. Multiplication

4. Division

5. Addition

6. Subtraction

So you start with parenthesis, then exponents, and so on.

(2 + 3) + 2^2 x 3 - 5 =

(5) + 4 x 3 -5 =

5 +12 - 5 = 2

Well, when you are investing there is a similar order that is generally optimal to follow. There are accounts that give you ‘free’ money, have tax-benefits, or help with diversifying your tax exposure. By following the proper order of investing operations you set yourself up for optimizing your savings.

[Note - We are going to focus solely on your available investment accounts. But it is important to ensure you have adequate emergency savings, pay off high-interest debt, and look to invest in side business. We will hit on where we think these items fit in, but don’t put all your money into retirement accounts with high penalties for early withdrawals if you have no emergency savings and lots of high-interest debt and looking to stand up a business.

You don’t want to end up in a liquidity crunch where you don’t have adequate liquid cash to pay for upcoming expenses.

And starting a side business is still one of the best risk/reward trade-offs there is. You should be doing that regardless of your investing. So that is completely outside the scope of the post. Do that, increase your cashflow, and invest it.]

So what is the recommended order of investing operations?