Clever Economy

4 Honest Tips for No-Nonsense Investing

Investing is an important step in any financial journey. You’ll hear so much investment advice in the world from so many different people who have just as many different agendas. As Kenny Rogers said, there’s a time to hold ‘em, a time to fold ‘em, and a time to walk away. Check out these 4 tips for some no-nonsense investing:

1. It’s okay to wait

You should never feel like “I’m X years old, and still don’t have an investment portfolio?!” Everyone invests at different times. It’s not how old you are or how many years you’ve been working, its the state of your finances overall. If you’ve got credit card debt, student loans, or payments with high interest rates–you should always pay such things off before investing. Your expected return on investment is probably lower than the interest rates for these things. Of course, the earlier you invest, the sooner you can let the magic of compound interest rack up a nice return for retirement. However, you get no bonus points for investing too early when you don’t have the capital simply for the sake of investing. You’re not investing to invest, or investing to tell friends and family that you’re “investing,” you’re investing for a return! Returns come when you have the capital and when you’re out of debt.

2. Get advice but remember who you’re trusting

Get a financial advisor, but remember that they’re also a fallible person, just like you are. They may have studied business but they also partied in college. They have a degree in finance but they still can’t predict the future. Trust them to guide you, not to be financially literate instead of you. Depending on your situation, you may need a full on investment manager, or you just may need financial advice from time to time. Always be in contact, always understand what they’re doing with your money, and have some exit ramps if you don’t like where things are headed.

3. Index funds are fine

In a famous example, Warren Buffet invests in index funds instead of hedge funds, because he expects them to beat the market overall. Index funds take some stock from the top 500 stocks on the market and give you an average of it all. With mutual funds and hedge funds, you’re betting on certain businesses against other businesses. You’re betting Apple against Amazon, or Nike against Adidas. In an index fund, you’re betting on the market itself. It’s far less sexy but will give you nice returns in the long run and get the job done.

4. Investing as a personality

If you’re steering away from index funds and are looking at buying some Tesla and Apple, its probably because you aren’t just concerned about returns, you’re also concerned about conversations at parties about what stocks you own. That’s a fine approach! Just be honest with yourself about why you’re so motivated to avoid the boring index funds and go after the hotter brands. Don’t overextend yourself, and keep a firm grip on the liquidity of your funds.

For some, investing is going to be a slow and steady wins the race, Warren Buffet approach. You’ll go after the index funds. For others, investing is going to be part of your lifestyle and your personality, and here its important to have specific stocks, be a bit more aggressive, and study the market. Both approaches are fine, as long as you know why you’re doing what you’re doing. Above all, know who you’re trusting for advice and what their agenda is, and don’t worry about investing relative to age and career–worry about investing relative to your financial situation. There is no right age to begin investing, there are only right times. The right time is when your financial situation would truly benefit from investing.

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