Disclaimer: All of the information contained herein is based purely on conjecture, and my personal foray into managing my money. I will not be releasing information on the stocks that I invested in, nor any ‘tips or tricks’ on where to put your money. I am only sharing general guidelines that worked for me – any action on your part is of your own risk.
1) Time is your friend, for now.
Invest as early as possible because it is the effect of compound interest that provides real long-term growth. It is okay to start small; just start. It is even acceptable to invest (a small amount) of your money in higher risk/higher yield assets.
2) It can become your enemy.
Age reduces the time you have for compounding which results in an insufficient recovery window if there is any loss. So, invest now. A dollar invested at 40 will suffer from stagnant growth compared to the dollar you invested at 20. As time wears on however, you want to be doing two things:
- Increasing the amount you regularly invest (when you can).
- And begin moving a higher percentage of assets to lower risk/lower yield investments (and hold).
3) The most valuable resource? Your mind.
Go here for full disclosure.
For brevity:
- Never stop advancing your knowledge.
- Get a degree and or certifications in a field that has positive growth for the future.
- Most importantly, doing what you enjoy in an area that has barriers to entry (the more, the better).
- Limit debt from college – work through it!
4) Have a plan (and a contingency plan).
Estimate your short and long-term financial condition:
- Where are you going to plant your roots?
- Will you invest? Save? At what rate?
- Have a car? Is it paid off? Keep it until it is more expensive to fix than upgrade (create a cost-benefit analysis).
- I tend to avoid leases and buy in case, but always check the market before making a huge financial commitment.
- Will you have a budget?
- How is the stability of your career, employer, field?
- Kids? Plan ahead.
- How large will your emergency fund be?
Save in advance for purchases!
5) Build a nest egg early, and forget about it.
I understand that math can be scary, but if there is one concept that I hope you understand it is the power of compound interest:
Future value = present value * (1+yield)^N
Present value is the amount of capital you first invest, say, $1.
Yield is simply the aROI (average return of investment)
And ‘N’ is the length of the investment in years
PV = $1
Yield = 7%
N = 40 years.
A dollar invested at an annual average rate of 7% compounds every 10 years; if you take that dollar out at 25 it becomes a $16 loss in your retirement at 65. That’s a harmless example, but imagine if it were a down payment on a house, say, 15k – it becomes a loss of a quarter of a million dollars. Yep, you just lost 250k.
6) The truth about debt.
Bad debt is any debt incurred that does not pay itself off within ten years – offering little to no financial benefits.
Good debt is debt incurred because you acquired an appreciating and useful asset.
University is not for everyone, so ask yourself: Can you (realistically) garner debt from the investment in yourself and secure a career post-college that will pay off said debt in under ten years? If so, it is considered a good debt as a degree will increase your earning potential, however, if you cannot – start working now. The four years it takes to acquire an education can be used to propel yourself in a company and make money right away.
However, always look to get qualifications, certifications, or even a degree a bit later.
7) Manage well.
Income is what you live on; wealth is what you retire on.
It is entirely possible to manage your own investment portfolio, especially if you are just beginning, and I am not condoning an entirely hands off approach, but finding a suitable financial adviser can help. I manage my own (small) portfolio, but that’s because I am a control freak and I am personally interested in finance and the economy. Regardless of what you choose, I implore you to, at the very least, understand where your money is coming from and how any business you invest in makes it’s profits.
Never, in any endeavor, just leave it up to someone else to handle your affairs.
8) Diversity
There will never be a single investment that is ‘good’ forever. There will be changes in the local, national, and international economies, tax law changes, fluctuating asset values that are all unpredictable. What does that mean? Invest your money in uncorrelated assets; as such, if one is down the other can be up. Uncorrelated assets are so when the factors that drive their values are independent.
Vary your investing approach to include a multitude of different stocks/markets. I keep a large chunk of my liquidity in a low risk, secure asset that doesn’t fluctuate much and is tied into an IRA as an anchor. IRA’s are great because they do not penalize you upon withdrawal for invested principle and future earnings.
9) Double your money (the smart, and long way).
Every company has a retirement plan that either has profit sharing and or company matching up to 5%, but the average is about 2%, and it is the instant doubling of every dollar you invest into that account. It’d be foolish not to be doing so every chance possible. Matching it with an automatic payroll deduction is a 100% interest rate on your money. Invest as much as reasonably possible and in every way possible in order to maximize your earnings, but always understand, and track your investments to gauge their effectiveness.
And, investing is not accurately represented in movies – you do not trade every single day; you hold for as long as you can.
Intp x Intj 