As a boy, I spent a lot of time annoying our next-door neighbor, Todd, a successful work-at-home plastics executive. In exchange, he taught me curse words, how to play poker, and one very smart habit.
Todd read a Boston Globe every morning in a very specific way: First he opened the comics, then the stock market tables. Then he moved onto the rest of the paper, but he was sure to skip the local headlines mostly filled with shootings and scandal.
Todd’s newspaper ritual offered some valuable lessons in life: never stop laughing or learning, and ignore the negative stuff. One lesson, however, is especially suited to investing. If you want to become a better investor, never stop learning.
When I graduated from college started writing about personal finance, the stock market bored the hell out of me. After all, I was flat broke, and moving markets didn’t affect my bottom line. Still, I started to learn. I set up an imaginary portfolio in my Morningstar account and I even scrounged a few pennies together to buy a few shares of a mutual fund I liked.
Today, I have a more vested interested in the investing world, but my learning is far from over. In your twenties, it’s easy to avoid making poor investing decisions that will derail your financial plan because you don’t yet have a lot to lose: The important thing is to get money invested. What you do with that money is secondary. Of course, as you age, that all changes. The only question is: How knowledgeable of an investor will you be as you get older and your portfolio gets bigger?
And yes, this means you. It doesn’t matter if:
- You’re just out of college and broke.
- You’re not interested in investing.
- You plan to get an advisor to help you.
If you want to be financially secure someday, you are probably going to need investments to help you get there. And you need to make investing a part of your lifelong education. You can trust your 401(k) plan or financial advisor to help map out an investment plan and choose investments, but you still need to know things like the important of diversification, portfolio rebalancing, and how to spot a skunk investment (not to say your advisor will someday push one on you, but what would be stopping him or her if you didn’t know the difference?)
So start learning. The best way to start is to simply read the investing section of your favorite newspaper. You can also read publications like The Wall Street Journal and Barron’s, or get a free account at an investment-grading site like Morningstar.
An informed investor is a smart investor. How much do you know?