Advice For Someone Just Starting Out With Investing
Posted: Brandon Arns
“What do I do with my money?” It’s a question I’m starting to get more and more frequently. Most of my peers (late 20s give or take a few years) are at a stage in life where they are starting to settle into their career, have paid down some debt and are now saving a portion of their income. Whether that’s through a retirement account, like a 401k, or an outside savings account, many are now faced with the decision of what to do with their money.
Unfortunately, few have had any formal teaching in investing concepts and there are so many differing opinions and conflicts of interest online, that it can be confusing to try and learn by yourself. Investing is somewhat like dieting, in that the advice depends on who you ask. Some believe low carb is the best diet, some believe in low fat, etc. Similarly, in investing, if you ask 10 different people for investing advice, you’ll get 10 different answers. I’ve been managing money professionally for several years now, and during this time I’ve come across numerous investing styles, philosophies, and experiences that have all shaped what I think is the best investing advice.
The Best Portfolio is the One You Can Stick With
Not a very sexy answer, I know. I’d much rather have a more concrete answer, like go buy an S&P500 index fund, or buy a target date fund, or diversify your money between stocks, bonds, real estate, commodities, etc. All of these are acceptable answers, but the answer truly depends on the person investing. One of the most, if not THE most, important determinants of your investing success is your personal behavior.
For example, a common bit of advice you may hear is to put all your money in US stocks when you’re young, and don’t look at it. Overall this is good advice. However, most people do look at it, and if they are sensitive about losing money (and who isn’t), stocks can be dangerous. Try to imagine you’ve worked hard for a decade to build up some savings, only to see the value cut in half during a recession. If you panic and sell, it turns out that this was the wrong advice, which is why I believe there is no cookie cutter investment advice that applies to all people.
The previous example demonstrates how advice should be tailored around how risk adverse you are, but there are other considerations such as what stage of your life you’re in, when you need the money and what it’s for, as well as how knowledgeable you are on the subject. The topic is obviously very nuanced, and I need about 100 more pages to fully explain my thoughts on it. But for the purposes of this blog, I’ll offer some basic tips that can at least get someone started.
Most important to investing is to be humble about what you think you know, because the market has a way of humbling you in a hurry. I didn’t include any specific funds in the advice above because there are literally 1000’s, but I can certainly help narrow it down for you. If you have any questions about investing, please feel free to email me at email@example.com.