Eric Tyson - Investing in Your 20s & 30s For Dummies

Developing and Testing Your Investing Beliefs

What are your investing beliefs? Most investors havent taken the time to consider that question, let alone to 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 investments to benefit from what was about to unfold. Such market timing is a fools errand. It sounds possible, and wed like to believe that it is possible, but its not possible on the scale various charlatans would have you believe.

As a reader of this book, you probably have a better idea of your investment beliefs than most 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 shouldnt force yourself into a portfolio thats 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 dont 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. Dont bail when things look bleak. The hardest time, psychologically, to hold on to your investments is when theyre down. Even the best investments go through depressed periods, which is the worst possible time to sell. Dont sell when theres 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 youre really feeling good about an asset class like stocks, and those assets have had a multiple-year run and are getting widespread accolades, thats 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 youre 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. Dont 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 dont 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. Dont 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. Dont 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, Tysons book says it all without being the least bit long-winded. Pick up a copy today. Itll 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 Tysons 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.

James C. Collins, coauthor of the national bestsellers Built to Last and Good to Great

Among my favorite financial guides are... Eric Tysons 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 doesnt tell you what to do or consider doing without explaining the whys and hows 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. Its a painless way to learn how to take control.

Karen Tofte, producer, National Public Radios Sound Money

More Best-Selling For Dummies Titles by Eric Tyson

Personal Finance in Your 20s 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 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 recommendations. Using the practical tips and techniques, youll design a mutual fund investment plan suited for your income, lifestyle, and risk preferences.

Home Buying For Dummies

Americas 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 Americas best-selling real estate team of Tyson and Brown House Selling For Dummies and Mortgages For Dummies.