Invaluable investing advice

By Allan Roth via   Article

Invaluable investing advice for young people

Hurdle one: Don’t spend all the money you make. You’ve got to live below your means and save. Bernstein notes that even if you can invest like Warren Buffett, you’ll die broke if you don’t save. Putting away at least 15% of your salary is critical. …

Hurdle two: Understand basic finance. Learn about the difference between a stock and a bond as well as the difference between luck and skill. …

Hurdle three: Don’t ignore financial history. Typically, we think a strong economy leads to great investing returns and vice versa. History shows the opposite. …

Hurdle four: We are the enemy. When it comes to investing, our brain exhibits pathological behavior. We seek out patterns to predict the future, yet what we’re really doing is just predicting the recent past and chasing past performance. …

Hurdle five: The financial services industry wants to make you poor and stupid. Bernstein says if you’ve read about the previous four hurdles, you’ll know more than the typical stockbroker or financial advisor. Bernstein warns ‘you are engaged in a life-and-death struggle with the financial services industry.’ Keep fees low.

He says to put equal amounts of your savings into three low-cost funds:

  • A U.S. stock market index fund
  • An international total stock market index fund
  • A U.S. total bond market index fund”

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