Illustration of a person standing in front of a life-sized chart showing different colors in waves and lines representing them balancing their stock portfolio.
LA Johnson/NPR
LA Johnson/NPR
Millions of Americans have started investing during the pandemic. And while the market has started to get a bit wobbly lately, stocks are still near all-time highs. So now is actually a really good time for people new to the world of investing to figure out how to get their ducks in a row and their investments set up in a smart way for whatever the future may bring.
If you’re an everyday investor drying to sift through Reddit threads and YouTube tutorials, this is for you. Here are a few common mistakes to avoid and some actionable tips to get you on your own investing path.
Betting on a hot stock isn’t worth it.
Despite news headlines on life-changing investments on one stock item like GameStop, it is too risky to make short-term bets with sizable sums of money on what a stock is going to do next. Instead, some of the most respected investors in the world have long said the best way for everyday investors like you and me to make money is to invest in index funds and hold those investments over long periods of time.
Explore Life Kit This story comes from Life Kit, NPR’s family of podcasts to help make life better — covering everything from exercise to raising kids to making friends. For more, sign up for the newsletter and follow @NPRLifeKit on Twitter.
Most index funds offer low fees and will allow you to essentially buy the entire stock market. That way, if any one stock crashes it won’t affect your portfolio. And if you really want to bet on individual stocks, the best advice is to do that with a very small part of your portfolio — and only with an amount of money you can afford to lose.
Build a diverse portfolio.
The key to everyday investing is diversification, which means owning different types of investments to spread out the risk. According to investment manager Paula Volent, you definitely want to own stock index funds because stocks over time have always offered the best return. She suggests owning a broad U.S. stock market index fund, a foreign developed markets index fund and an emerging markets index fund.
Volent also says you need investments that can do well when stocks are doing poorly. These include Treasury bonds and real estate funds. As far as how to know how much of each of these components is the right mix for you, there are different ways to figure that out. Age-based, or so-called “target-date,” index funds put together a mix of many of these components for you with a risk profile based on how many years you are away from retirement.
For more guidance, read David Swensen’s Unconventional Success.
Want to learn more? If you’re going to read one book, check out economist David Swensen’s Unconventional Success. It’s the ultimate introduction to everyday investing from a world famous investor who set out to tell the rest of us how to do this right. Jack Bogle’s book Common Sense On Mutual Funds is another classic.
Working with a financial adviser? Make sure they’re fee-only.
Checking in with a financial adviser is strongly recommended by experienced investors, but make sure you’re speaking with a fee-only expert, who isn’t receiving commissions for steering you into one investment over another. Once you find someone acting in your best interest, try to meet with them once a year or every two to three years. Find someone you can pay a flat fee for each visit. This will save you money in the long term
Rebalance your investments for stability and to maximize your return on your investments.
There is no need to panic, even in times of big corrections in the market. With a diverse investment portfolio, you actually have an opportunity to make some extra money off of big swings in the markets by selling what has gone up in value and buying more of what’s gone down.
Let’s say you’ve decided you should have 50% of your portfolio in a mix of stock index funds. If stocks crash and bonds rise in value, then the stock portion of your portfolio might only be worth 45% of your overall portfolio. You can sell some bonds and buy more stocks to get back to the target in your investment plan. Buying low and selling high is the right way to make money investing. But you’re not doing this randomly. You are sticking with your plan for your target allocation in your core portfolio.
Bottom line — please don’t panic and sell everything just because the stock market crashes and you see other people panicking and getting rid of their stocks. That can do irreparable harm to your portfolio. Buying high and selling low is not a good way to make money.
The audio portion of this episode was produced by Janet W. Lee.
We’d love to hear from you. If you have a good life hack, leave us a voicemail at 202-216-9823, or email us at LifeKit@npr.org. Your tip could appear in an upcoming episode.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
