4 answers
Isabella
Student
Lathrop, California
1
Question
Asked
463 views
How do I make smart investments ?
tips, and tricks for early investing and money management.
4 answers
Vern Novstrup
Environmental Engineer
30
Answers
Ventura, California
Updated
Vern’s Answer
There are entire books written on investing and money management. The following are things I learned the by trial and error. Most of the following will not appear in any book.
Money Management
1) You will need to have an account in a financial institution for direct deposit from most jobs. This does not mean a bank account. In most cases you will get better service and a low cost going to a local credit union.
2) If you have a checking account at a credit union make sure you have overdraft protection.
3) If you choose to have a credit card make sure you are able to payoff the balance monthly. Again a credit union will generally offer the best interest rates.
4) Try to live below your means (income level). In the long haul you will do much better. This means avoid buying a car if possible and if a car is absolutely necessary buy the vehicle that meets your most basic needs not the car that makes you look cool.
5) When making big financial commitments such as buy a car, leasing an apartment, etc. consider they lifecycle costs of the decision.
When buying a car:
what will insurance cost?
Will you have to pay for parking?
How much is the insurance?
Can you afford the gasoline?
When choosing a place to live:
How will you get to work?
How much will it cost?
Do you have key services nearby?
Investing
1) Pay off debts before investing?
2) Invest in yourself first. Education always has a good return on investment.
3) Avoid individual stocks and “fancy” investment funds. You will always know less than the professionals and professionals will nearly always underperform index funds. Actively managed funds tend to be a poor investment in the long-term.
4) Avoid investments that “smart people” say are a sure thing. Generally, the “smartest person in the room” is a fool.
5) If you want to invest in the stock market invest in index funds and always check the management fees associated with any investment.
Final thoughts
Always offer to buy lunch if you can afford it. That lunch is an investment in the relationships that you care about.
The full measure of a person is NOT how nice of car they own, the house they live in, or even the size of their investment accounts. The full measure of a person is how they use the money that they have to make the lives of the people around them better and the world a better place. Be generous with what you have but not careless. Two this point, when JP Morgan, a very powerful banker died, John D. Rockefeller said JP Morgan, "He owned all of us and he wasn't even that rich" in terms of personal wealth?
A man that dies with a single dollar in his pocket and ten friends if far richer than a man that dies with $10,000,000 in his bank account and no friends.
Feedback or thoughts?
Money Management
1) You will need to have an account in a financial institution for direct deposit from most jobs. This does not mean a bank account. In most cases you will get better service and a low cost going to a local credit union.
2) If you have a checking account at a credit union make sure you have overdraft protection.
3) If you choose to have a credit card make sure you are able to payoff the balance monthly. Again a credit union will generally offer the best interest rates.
4) Try to live below your means (income level). In the long haul you will do much better. This means avoid buying a car if possible and if a car is absolutely necessary buy the vehicle that meets your most basic needs not the car that makes you look cool.
5) When making big financial commitments such as buy a car, leasing an apartment, etc. consider they lifecycle costs of the decision.
When buying a car:
what will insurance cost?
Will you have to pay for parking?
How much is the insurance?
Can you afford the gasoline?
When choosing a place to live:
How will you get to work?
How much will it cost?
Do you have key services nearby?
Investing
1) Pay off debts before investing?
2) Invest in yourself first. Education always has a good return on investment.
3) Avoid individual stocks and “fancy” investment funds. You will always know less than the professionals and professionals will nearly always underperform index funds. Actively managed funds tend to be a poor investment in the long-term.
4) Avoid investments that “smart people” say are a sure thing. Generally, the “smartest person in the room” is a fool.
5) If you want to invest in the stock market invest in index funds and always check the management fees associated with any investment.
Final thoughts
Always offer to buy lunch if you can afford it. That lunch is an investment in the relationships that you care about.
The full measure of a person is NOT how nice of car they own, the house they live in, or even the size of their investment accounts. The full measure of a person is how they use the money that they have to make the lives of the people around them better and the world a better place. Be generous with what you have but not careless. Two this point, when JP Morgan, a very powerful banker died, John D. Rockefeller said JP Morgan, "He owned all of us and he wasn't even that rich" in terms of personal wealth?
A man that dies with a single dollar in his pocket and ten friends if far richer than a man that dies with $10,000,000 in his bank account and no friends.
Feedback or thoughts?
Kenneth Romanowski
CFP Board Emeritus (R), CTFA (Ret.), Instructor and Researcher of Financial History
29
Answers
Ardmore, Pennsylvania
Updated
Kenneth’s Answer
Hi, Isabella. You asked about making "SMART" investments. A "Smart" Investment is an investment that is appropriate for you and your needs and goals. Indeed, I have taught entire courses on Investments, so there is a great deal of information out there. Unfortunately, it is not all good.
Here are a few tips:
1. Learn as much as you can about the different types of investments.
2. Don't be fooled by information or education that is really a sales pitch. Some investments are marketed very heavily, and when that happens, you typically only hear the positives. Understand the positives AND negatives of every investment.
3. Investments imply risk, so ask yourself: What would happen if the value went to zero?
4. Diversify! Spread out your investments and don't concentrate too much of your money in one area. Ideally, find investments that do not always move together in the same direction, otherwise, the total of your investments (known as your portfolio) will not increase steadily and be subject to wild swings.
5. If investing in the stock market, try to avoid buying individual stocks. Consider mutual funds or Exchange Traded Funds (ETFs) that invest in a broad range of investments and provide you with diversification.
6. Be sure that the investments you buy match your goals. Stocks have performed very well over the long run. If you have a short-term goal, consider safer investments like bank certificates of deposit, government securities, or highly-rated corporate bonds.
Learn about investments. Find a good textbook or website that is objective and not trying to sell you something.
Decide on your short-term and long-term goals.
Invest using a brokerage account and diversify your investments.
Here are a few tips:
1. Learn as much as you can about the different types of investments.
2. Don't be fooled by information or education that is really a sales pitch. Some investments are marketed very heavily, and when that happens, you typically only hear the positives. Understand the positives AND negatives of every investment.
3. Investments imply risk, so ask yourself: What would happen if the value went to zero?
4. Diversify! Spread out your investments and don't concentrate too much of your money in one area. Ideally, find investments that do not always move together in the same direction, otherwise, the total of your investments (known as your portfolio) will not increase steadily and be subject to wild swings.
5. If investing in the stock market, try to avoid buying individual stocks. Consider mutual funds or Exchange Traded Funds (ETFs) that invest in a broad range of investments and provide you with diversification.
6. Be sure that the investments you buy match your goals. Stocks have performed very well over the long run. If you have a short-term goal, consider safer investments like bank certificates of deposit, government securities, or highly-rated corporate bonds.
Kenneth recommends the following next steps:
Afrad Mahamed
Operations & Project Management
80
Answers
Lakeland, Florida
Updated
Afrad’s Answer
Know your finances. Exactly how much money you have coming in and when. How much recurring expenses you have, including food, vehicle, etc. And how much you usually have left.
Always look for ways to save, especially on recurring bills. There are always new deals that can save. And many times we are paying for things that we do not really use.
Have a good plan for the money you have left after taking care of your responsibilities. The highest priority should be to save a portion of it. Then think about investing, a portion.
Investments have risks, your savings is your backup, don't risk it or at least only a portion.
Invest in a mixture of things, to have diversity, which helps if some are tracking in the wrong direction.
Some simple examples to get started:
- Open a brokerage account. You can do it for free here https://www.fidelity.com/ or https://www.webull.com/, lots more available.
- Purchase some cheap stocks to help build your understanding and experience. You will learn how to buy and sell and about volatility etc.
- Research Roth IRAs (this is long term, you can't withdraw until 59.5yrs old) but interest within these are compounded.
https://www.bankrate.com/retirement/roth-ira-plan-calculator/
- Research and purchase mutual funds within your IRAs, much safer and more stable than individual stocks.
Never invest money that you expect to need, especially in the near future.
It is NOT a sure thing -- But I recommend learning about Roth IRAs because of the proven track record, research it.
Regular stock investing takes time to learn, have patience and start with small amounts.
Even if a purchase seem like the best investment, DO NOT put all your money in it (referring to the money you planned to invest)
Eventually, you will learn enough to make the best decisions for you. Hope this helps, best of luck!
P.S. Tiktok and Youtube have tons of educational videos on investing - but be sure to check the information.
Always look for ways to save, especially on recurring bills. There are always new deals that can save. And many times we are paying for things that we do not really use.
Have a good plan for the money you have left after taking care of your responsibilities. The highest priority should be to save a portion of it. Then think about investing, a portion.
Investments have risks, your savings is your backup, don't risk it or at least only a portion.
Invest in a mixture of things, to have diversity, which helps if some are tracking in the wrong direction.
Some simple examples to get started:
- Open a brokerage account. You can do it for free here https://www.fidelity.com/ or https://www.webull.com/, lots more available.
- Purchase some cheap stocks to help build your understanding and experience. You will learn how to buy and sell and about volatility etc.
- Research Roth IRAs (this is long term, you can't withdraw until 59.5yrs old) but interest within these are compounded.
https://www.bankrate.com/retirement/roth-ira-plan-calculator/
- Research and purchase mutual funds within your IRAs, much safer and more stable than individual stocks.
Never invest money that you expect to need, especially in the near future.
It is NOT a sure thing -- But I recommend learning about Roth IRAs because of the proven track record, research it.
Regular stock investing takes time to learn, have patience and start with small amounts.
Even if a purchase seem like the best investment, DO NOT put all your money in it (referring to the money you planned to invest)
Eventually, you will learn enough to make the best decisions for you. Hope this helps, best of luck!
P.S. Tiktok and Youtube have tons of educational videos on investing - but be sure to check the information.
josh l
Associate
17
Answers
New York, New York
Updated
josh’s Answer
A great book to read is I Will Teach You To Be Rich by Ramit Sethi. If you want to learn what you should do for financial success throughout your whole life, the book is a great read.
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