Research Would Show: Mutual Funds are Terrible
I was just talking to my Canadian friend this morning and she was telling me about her mom who has hundreds of thousands of dollars invested in mutual funds. With even a minimal amount of reading about investment options, you would know that mutual funds are basically a total rip-off, particularly if you’re from Canada since the fees there are the highest in the world and you’d be far, far better off buying individual dividend paying stocks or broad-market ETF’s.
Research Would also Show: Hot Stock Tips are Terrible too
And then I have friends and family members who try to take the easy way out and just buy individual stocks based on some hot tip from their friend or family member. Almost always these hot tips are not for a company like Apple or Chevron or Pfizer, in which case you couldn’t really go wrong, but instead, the tip is for some insanely risky company.
What do I mean by “Insanely Risky?”
1. Something sold outside the major exchanges in developed countries
2. Really small companies
4. Basically anything in China, due to sketchy accounting procedures (although you’d probably be fine with a broad market China ETF, but I’d never buy an individual stock)
5. Something bought on a tip from a friend without any research
6. Investing in one single company for your entire portfolio, based on said hot tip
Research: It can Make you a Millionaire
When I say that a bit of basic research about investing in your 20’s or 30’s can you make you a millionaire by the time you retire, it is not hyperbole. If you spent say 100 hours doing some research after you’ve gotten your first job out of university and find something that works for you (I like dividend stock investing or ETF’s), and stick with it until you retire, it would be pretty hard for you not to be a multimillionaire. Conversely, if you remain financially illiterate your entire life, it can really hurt you, such that you might end up having to work far longer than you actually want to.
Get Financially Literate
If there is one area that everyone should have a basic knowledge of, it is personal finance. Even 2 or 3 hours per month of reading in the area is enough (more is preferable of course!). Investing with no research is always a terrible idea. Some places I recommend for you to start:
Investopedia. This is by far the best website out there for the beginner investor.
Wise Bread. A massive array of helpful personal finance and frugal living articles for the beginner.
Mr. Money Mustache. Very entertaining and also really helpful, again for the beginner.
The Wealthy English Teacher: Teach, Travel, and Secure Your Financial Future. If you’re an ESL teacher, start here first.