Investing in your 20s & 30s for dummies

291 Pages·2018·5.518 MB·English

by  Tyson, Eric Kevin

Developing and Testing
Your Investing Beliefs
What are your investing beliefs? Most investors haven’t taken the time to consider
that question, let alone answer it. During the sharp stock market slide in 2008,
some investors started following particular gurus who claimed to have predicted
the financial crisis. These investors wanted to believe that someone out there
could predict important financial events and tell folks how to time their invest-
ments to benefit from what was about to unfold.
Such market timing is a fool’s errand. It sounds possible, and we’d like to believe
that it is possible, but it’s not possible on the scale various charlatans would have
you believe. Furthermore, many of those who boast the loudest about their
market-timing ability are worse than average at it.
It’s challenging to work with someone on his investments when he has little in the
way of background and beliefs. As someone seeking to educate yourself about invest-
ing, you may have a better idea of your investment beliefs than other investors do.
To help you along in this process, here are some beliefs for you to consider:
» Your own personal comfort matters. A wide range of investments are
available to you, including stocks, exchange-traded funds (ETFs), mutual funds,
real estate, and small business. Some folks are simply more comfortable with
particular investments, so you shouldn’t force yourself into a portfolio that’s
recommended as being best for you. Consider the value of your time and
your investing skills and desires. Investing in stocks and other securities via
the best mutual funds and ETFs is both time-efficient and profitable. Real
estate investing and running a small business are the most time-intensive
investments.
» Costs matter. The more you pay in commissions and management fees on
your investments, the greater the drag on your returns. And don’t fall prey to
thinking that you get what you pay for. Take advantage of tax-deductible
retirement accounts, and understand the effect of your tax bracket when
investing outside tax-sheltered retirement accounts. Minimize your trading.
The more you trade, the more likely you are to make mistakes. Also, you
suffer increased transaction costs and higher taxes for non-retirement-
account investments.
» Market timing is much harder to predict than folks realize. Don’t bail
when things look bleak. The hardest time, psychologically, to hold on to your
investments is when they’re down. Even the best investments go through
depressed periods, which is the worst possible time to sell. Don’t sell when
there’s a sale going on; if anything, consider buying more. Ignore soothsayers
and prognosticators. Predicting the future is nearly impossible.
» There are better times than others to sell. When you’re really feeling good
about an asset class like stocks, and those assets have had a multiple-year run
and are getting widespread accolades, that’s a good time to lighten up if you
have other good reasons for doing so. By contrast, you can bump up your
stock allocation if you’re comfortable doing so after a major market decline.
» Think long-term. Because ownership investments like stocks, real estate, and
small business are more volatile, you must keep your long-term perspective
when investing in them. Don’t invest money in such investments unless you
plan to hold them for a minimum of five years and preferably for a decade or
longer.
» Diversify. Diversification is a powerful investment concept that helps you
reduce the risk of holding more-aggressive investments. Diversifying simply
means that you hold a variety of investments that don’t move in tandem in
different market environments. When investing in stocks, for example, invest
worldwide. You can diversify further by investing in real estate.
» Emphasize value. Over the long term, value-oriented investments tend to
produce higher returns with less volatility than do pure growth-oriented
investments.
» Ignore the minutiae. Don’t feel mystified by or feel the need to follow the
short-term gyrations of the financial markets. Ultimately, the prices of stocks,
bonds, and other financial instruments are determined by supply and
demand, which are influenced by thousands of external issues, including
millions of investors’ expectations and fears.
» You are what you read and listen to. Don’t pollute your mind with bad
investing strategies and philosophies. The quality of what you read and listen
to is far more important than the quantity.
Praise for Eric Tyson
“Eric Tyson for president! Thanks for such a wonderful guide. With a
clear, no-nonsense approach to . . . investing for the long haul, Tyson’s
book says it all without being the least bit long-winded. Pick up a copy
today. It’ll be your wisest investment ever!”
— Jim Beggs, VA
“Eric Tyson is doing something important — namely, helping people
at all income levels to take control of their financial futures. This book
is a natural outgrowth of Tyson’s vision that he has nurtured for years.
Like Henry Ford, he wants to make something that was previously
accessible only to the wealthy accessible to middle-income Americans.”
— J ames C. Collins, coauthor of the national bestsellers Built to Last
and Good to Great
“Among my favorite financial guides are . . . Eric Tyson’s Personal
Finance For Dummies.”
— Jonathan Clements, The Wall Street Journal
“In Investing For Dummies, Tyson handily dispatches both the
basics . . . and the more complicated.”
— Lisa M. Sodders, The Capital-Journal
“Smart advice for dummies . . . skip the tomes . . . and buy Personal Finance
For Dummies, which rewards your candor with advice and comfort.”
— Temma Ehrenfeld, Newsweek
“Eric Tyson . . . seems the perfect writer for a . . . For Dummies book. He
doesn’t tell you what to do or consider doing without explaining the
why’s and how’s — and the booby traps to avoid — in plain English. . . .
It will lead you through the thickets of your own finances as painlessly as
I can imagine.”
— Clarence Peterson, Chicago Tribune
“Personal Finance For Dummies is the perfect book for people who feel guilty
about inadequately managing their money but are intimidated by all of the
publications out there. It’s a painless way to learn how to take control.”
— Karen Tofte, producer, National Public Radio’s Sound Money
More Best-Selling For Dummies
Titles by Eric Tyson
Personal Finance in Your 20s & 30s For Dummies
This hands-on, friendly guide provides you with the targeted financial advice you
need to establish firm financial footing in your 20s and 30s and to secure your
finances for years to come. When it comes to protecting your financial future,
starting sooner rather than later is the smartest thing you can do. Also check out
Personal Finance For Dummies.
Mutual Funds For Dummies
This best-selling guide is now updated to include current fund and portfolio rec-
ommendations. Using the practical tips and techniques, you’ll design a mutual
fund investment plan suited for your income, lifestyle, and risk preferences.
Home Buying Kit For Dummies
America’s No. 1 real estate book includes coverage of online resources in addition
to sound financial advice from Eric Tyson and front-line real estate insights from
industry veteran Ray Brown. Also available from America’s best-selling real estate
team of Tyson and Brown — Selling Your House For Dummies and Mortgages For
Dummies (Tyson co-authored with Robert Griswold).
Real Estate Investing For Dummies
Real estate is a proven wealth-building investment, but many people don’t know
how to go about making and managing rental property investments. Real estate
and property management expert Robert Griswold and Eric Tyson cover the gamut
of property investment options, strategies, and techniques.
Small Business For Dummies
Take control of your future, and make the leap from employee to entrepreneur
with this enterprising guide. From drafting a business plan to managing costs,
you’ll profit from expert advice and real-world examples that cover every aspect
of building your own business.
Investing in
Your 20s & 30s

Investing in
Your 20s & 30s
2nd Edition
by Eric Tyson, MBA
Author of Personal Finance in Your 20s & 30s
For Dummies and Mutual Funds For Dummies
Investing in Your 20s & 30s For Dummies®, 2nd Edition
Published by:
John Wiley & Sons, Inc.
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Hoboken, NJ 07030-5774
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Copyright © 2018 by Eric Tyson
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Control Number: 2017956632
ISBN 978-1-119-43140-4 (pbk); ISBN 978-1-119-43138-1 (ebk); ISBN 978-1-119-43142-8 (ebk)
Manufactured in the United States of America
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