Read this short 10-20 min guide and never had to buy a $50 Clifnotes Cram Guide again!
A lot of people – esp. college students – want to invest because it makes a lot of money but … there’s also the chance that it causes you to lose a lot of money if you aren’t wise with your choices.
Here’s some advice from yours truly, my reading on billionaire and VP of Berkshire Hathaway Charlie Munger, finance author Ramit Sethi, and blogger Nat Eliason on how to conquer that fear!
“As you’re working, put your money into these categories:
1)OH YEAH Money! – spent this within 30 days. Be generous and kind. Buy the main things you want. Pay energy bills, student loan, kid’s loans, future grandson’s loans?! Have fun! Ideally this money should be at most 30-60% of your monthly income.
(However, if you have to pay massive student/house/gambling/etc loans and are depressed… stop reading. Nothing I say will help you. Sorry. Also trust me a $50/hr therapist may or may not help either. Pray for help.)
2) 9!! Emergency MONEY!!!!! – This idealistically should be about 10-20% of monthly income. Basically for bad cases if you get into a car crash or get cancer or need to pray to Buddha Jesus-Socrates-MY Guardian Angel, etc.
3) BUFFET MONEY!!! – The remaining amount of money will be for investing.
A good ratio to try for is put 30-70% in an index or mutual fund – like Vanguard. The reason for this is that it’s really hard to beat the market(Warren Buffet and Munger both agree) so if you can’t, just join all the other stock market players by getting in on a mutual or index fund that just grows at the rate of the market 5-7% annually. This is much better than the 2% interest rate you will get at any bank. (Bank of America? WUT?)
The remaining money for investing is really for you. Buy Apple, Tesla, that random start-up company that may come out.
But make sure you do a TON OF RESEARCH and YOU TRY YOUR BEST TO understand the following:
1) Is this start-up/company worth the price?
2) What is its competitive advantage?
3) Do I believe in the management, sales, dev team and product?
4) How long do I believe this business will last until I will sell the stock? (1 month, 6 months, 5 years?…)
5) Am I ready to invest my money where my mouth is? Time to play the stock market game!!!
If you do this correctly you will become millionaire Tai Chi Ro. He’s basically a neurovascular surgeon at the Peking Hospital in Donjing, China. He invested in a little-known company Tesla back in 2010 when the stocks were selling really cheap.
Now he made $200000 in his investment. The problem was that everyone was talking savage about Elon Musk back then when the Tesla company and electric car company was thought of as a joke. Now look who’s talking? $30,000 Tesla? That’s cheap?!
Hope this guide helped! Please don’t come back to me crying if you lose money on the stock market. The $50/hr therapist may not help but the $2000/hr therapist who helped billionaire Grouch Inc CEO John Johnson may. Also the Serenity prayer may help. (No seriously, Munger will say that he’s had to sit through seeing over 50% of his net assets vanish.)
In the comments, please let me know your thoughts on personal finance! Feel free to disagree with mine and let us know how you think your money philosophy can help us readers! Again, money is important but it’s doesn’t always buy happiness.