Best Advice: Investing

Investing is a mysterious and yet amazing process. Edward Jones and other such companies work very hard to try and sell various and exotic products to help people “put their money to work.” Private retirement has been on the rise and that means the everyday person has to know more about investing than ever before. I had the unique chance to grow up with the family knowledge of how to  invest money and do very well. Many young people who find themselves in a higher tax bracket than their parents are trying to figure out how to wisely invest their money. It all seems fine and well at first but then you have to decide what kind of investments to store your wealth in and that becomes the hard part. Individual stocks or ETFs? Mutual Funds? Passive or active? How high are the fees? All of this is up for consideration when deciding to “invest.” I’m going to give you some general advice. Your actual decisions are up to you and you should consult a professional and do your homework before actually investing in anything. I’m not advocating for any investments and I am not being paid by anyone to write this advice. In short, read, educate, but I’m not responsible for any gains or losses and I wish you good luck.

Books

There are some really great books on investing and wealth. The gold-standard is Rich Dad, Poor Dad which is not only about investment but about how to manage money and wealth. If you come from a lower middle class to poor background ($50,000 income and below) that book is essential to changing your attitudes around money. They also publish a great series on almost every financial matter so don’t stop your education at the first book, keep going.

ETFs

ETFs are a wonderful invention because they really take the guesswork out of individual stock picking. There are thousands of companies on 5 different major exchanges. Things can get very confusing very quickly. ETFs are nice because they are traded like shares while owning bits of companies from a select industry or class of investments. They are mutual funds without the fees and are far easier to make a change with and are traded like regular stocks on exchanges.

Mutual Funds

Mutual Funds are a fairly modern invention as they grouped stocks together and then paid out return based on how much money an investor had in the fund. Mutual Funds are an easy way to diversify and were the go-to diversification investment before ETFs arrived a few years ago. Mutual Funds have a few problems. If their stock classes don’t go well then little return is produced and what is even worse is that the fees that have to paid to the fund for it’s management can be outrageous. Most financial advisors are big fans of Vanguard funds because the fees are not outrageous (many of theirs have no fee) and they produce a good return. Mutual Funds, like stocks and ETFs, work best when they are bought and held for a very long time. If you are planning for retirement then look not at what a fund is doing today, look at what it has done for the past 10 years or longer (if available). If a fund can do well over time then it is balanced and has quality managers.

Bonds

Bonds are always an interesting investment because they are rated by agencies and are often grouped together to be invested in as a bunch. Bonds are nothing more than debt. The investor is loaning money to a company for a consistent payout or a lump some payout sometime in the future. Corporations and governments issue bonds and some of the municipal, county, and even state bonds can do quite well. The best way to get into bonds is to get on a trading platform like E-trade or Charles Schwab and do some research.

Value Investing

My favorite kind of investing is value investing because it involves investing in companies that are actually doing well by create value for the customer and the investor in turn. Many individual stocks and even a few funds are built up on hype, news, potential with little actual value to back it all up. The value investor looks for solid, long-term value. That is where the solid return lies for a long-term investor. Notice that I’ve mentioned long-term a few times. Many people get this idea that they can invest their money on Monday and be rich by Friday. That is true but that Friday wealth lies 10-25 years in the future. Even if someone is just getting started in their 40s or 50s, there is still plenty of time to invest money and retain value.

Ready to invest your money?

Good luck and good value hunting!