How to Invest

 

How to Invest

An investment guide for everyone.

 

Investments are a form of spending but spending on SAVINGS. Savings for yourself, your future, your car, home, retirement, your family, your child or children’s future. 

 

Smart investing involves knowing your needs and goals, researching and MAKING good choices.

 

Needs and Goals

 

We are all unique. But while we all have some things in common: we each answer needs in our own way. Investment needs depend upon your stage of life. Needs and goals include your education, car, home, family, children’s education and retirement and a slew of goals specific to each. 

• For students, your job is school. Max out your education. Challenge yourself and take school seriously; your life will depend upon it. 

Take advantage of every wise opportunity but most importantly, avoid bad choices. NO “for-profit” schools or schools that advertise with promises. Go to community college if you must, use school counseling, government and agency programs/grants for low/no income students. Don’t sign student loan applications.

• 20s? Not a Student? Try and do what you love and whatever you make, SPEND LESS than you make. Take advantage of every opportunity, especially low/no income programs. Your library is your friend. MAX OUT your retirement plan at work and you’ll have thousands saved by your 30s. No work retirement plan? Change jobs or open your own IRA (Individual Retirement Account) at Vanguard or T Rowe Price² and MAX THAT OUT. Save for down payments on a car and home. Put your college and retirement funds into an S&P 500 index fund. Put your down payment savings into a money market account³. 

• For all adults-SPEND LESS THAN YOU EARN. Begin planning now, MAX OUT your retirement plan at work. Don’t neglect your basic needs to complete your education, avoid unwise debt and buy a home-a 30-year mortgage is your friend! No work retirement plan? Open your own IRA and MAX THAT OUT. If needed, still save for down payments. 

Buying a home may be the best INVESTMENT you can make. You not only INVEST your money but you LIVE in it and, as you pay down your mortgage, your home equity grows too! Mortgage payment is a form of forced saving and may be one of the best ways to accumulate wealth.

• For parents of newborns, get your child’s SSN right away and open a children’s account. Work with Vanguard or T Rowe Price to make the right choice for you. Investing in a S&P 500 stock index fund these first 3 or 4 years can triple your child’s assets! 

• For middle aged adults with children-kid’s college is looming and then retirement, no time to slouch now, you must juggle spending AND saving. With or without children, live your best life, make your best choices.  

• Near retirement? -You can be retired for 30 years or more, you need growth. Forget income, all income comes from principal or growth. Income funds UNDERPERFORM, buy and hold an S&P 500 Index fund (or Nasdaq 100 index funds, if you can stand it. 

Index fund declines are a COST! A price you pay for superior FUTURE returns. 

NEVER pay fees for a financial planner or broker commissions. Forget buying stocks, commodities, options and ESPECIALLY CRYPTO. These are all gambling. Don’t gamble until you have substantial income and can AFFORD gambling losses.

When it comes to insurance, buy only car and home insurance, and when you have dependents buy ONLY straight life insurance. Insurance has huge commissions and is NOT an investment.

Research 

Your library is your friend. Local, state and federal programs, agencies and non-profit organizations can be lifelines. Learn and know your choices, especially, what to avoid! 

 

WHO you invest with is as important as WHAT you invest in. Almost ALL financial professionals offer products you don’t need, with unnecessary complexity and with exorbitant, explicit or hidden fees. Throughout your financial life do not be lured BY and avoid almost ALL full service advisors, insurance salesmen (except when you NEED to insure your home, life or car) and stockbrokers. 

 

Good advice IS available but sadly without a good MBA one may not know what good advice looks like. In my opinion, for those NOT in the know, only a few investment firms truly exist to serve their customers: Vanguard and T Rowe Price are the major companies that I recommend. Call them, tell them your situation and they will give you excellent unembellished advice (no promises, no misrepresentations).

 

BEWARE ALL GET RICH QUICK SCHEMES. You already know this. As for bitcoin, the stock market, house flipping, etc. etc. these are all forms of gambling and totally depend upon your financial weight class. Choose wisely. 

 

Investment Choices

 

Just like spending, you have choices. Different investments have different risks. Time is your friend. Below is a table of investments ranked by risk, Risk is always a subjective measure-subject to your personality and financial weight class. Time is your friend and reduces your risk for retirement investments. Here’s one standard way to rank investments by risk:

 

Investment	Historical and  Estimated Rates of Return	Risk
Bank Savings	0.1% to 3%, 1%	Very low, FDIC insured
Money Market Funds	-1% to +2%, +3% on average	Very low
Bond Funds	-3% to +5%, +5% on average	Low
Home Ownership	-10% to +10%, +8% on average	Market risk
Stock Market	-20% to +20%, +8% on average	Market risk
Technology Stocks	-40% to +40%, 12% on average	Above Market
Bitcoin	-50% to +50%, no average	Very high

 

Stock indexes have risen over time and this is the major reason honest professionals recommend stock index investments for retirement and long term investors. There is no guarantee this will continue! But, for the last 200+ years, it has.

 

Stock indexes are NOT favored by investment professionals due to their very low fees. Some will lure you with no fees but offer to share in your profits. Again, at Vanguard or TRP, you won’t have to give up very low fees. 

 

Your investment life is just one part of your money life, social and family life. Make the most of what you have with your best possible choices. 

 

Why Vanguard or T. Rowe Price? I don’t work for them but in my experience, they are as good as it gets for investors of all weight classes.. I suggest you call them and once you get your bearings, then you can explore their websites. Their contact information is: 

 

Investor.vanguard.com 877-662-7447

troweprice.com 1-888-285-2612

Money markets have very low risk and are appropriate for short term investments where you can’t afford losses such as for a car or down payments.

 

Volatility is a fancy way of measuring how much an investment has fallen in the past. It does not predict how prices will move in the future.