April is Financial Literacy Month. In honor of this month, we have asked a couple of our financial speakers for their insight on how to become better with simple and complex money management.
Peter Ricchiuiti is a financial and investment expert who teaches audiences the strategies for buying stock, investing, and eases their economic fears. In this Q&A, he offers his top notch expertise in finding the right market to invest in.
Q: Some investments are based on recommendations, but how would the average person know where to invest?
A: Successful investing isn’t nearly as complicated as the industry makes it out to be. I could teach you all you need over lunch.
If you have a matching 401K contribution from your employer, take it. It’s free money and the monthly contribution is simple, automatic and painless. Treat your savings like a bill you receive from and for yourself.
#1. Invest that money prudently.
There’s no need to be a hero here. Stay diversified. That eggs/basket thing is real. The younger you are the greater percentage of your account should be in stocks. Think of the age rule here (if you’re 25 years old you should have 75% in stocks, 50 years old then put 50% in stocks.) While returns bounce around from year to year, over long periods of time a diversified portfolio of stocks has outperformed just about everything else.
#2. Think long term and don’t try to trade the market.
Don’t listen to the financial news, it will only make you crazy and drive you out of solid investments. I know lots of people who have made a lot of money in investing. Almost all of them bought good stocks or mutual funds at reasonable prices and held them for a long time.
#3. Don’t buy what’s hot.
Remember, if a majority of the people were right a majority of the people would be rich. Boring solid companies make fantastic long-term investments.
#4. If you do want to speculate in stocks take a small percentage of your money and leave the rest in tack.
Here I would focus on small company stocks that YOU understand and that YOU might have an edge on vs. Wall Street analysts. For this kind of investing I would recommend three books that are informative, readable and fun;
One Up On Wall Street by Peter Lynch
The Little Book That Beats The Street by Joel Greenblatt
And (if I must say so myself) Stocks Under Rocks by Peter Ricchiuti
As I tell my students here at Tulane, how you invest your money is far more important to your long-term financial independence than how much you actually earn!
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