Suze Orman, the world's foremost personal finance expert, shares her advice on how to succeed in investing.
Suze Orman is synonymous with personal finance. The two-time Emmy-winning host of The Suze Orman Show has helped countless individuals improve their financial situations. But while most associate her with saving, what many don’t realize is that she knows more than just a thing or two about investing and building lasting wealth from humble beginnings.
Her story is legendary: she went from being a 30 year-old waitress earning $400 per month to becoming one of the top brokers at Merrill Lynch. From there, she moved on to become a Vice President at Prudential Bache Securities.
Now, in a rare interview with Talking Numbers, Suze’s sharing her advice on how to succeed in investing. And you don’t need to be an expert to follow her tips. In fact, she breaks it down into three easy steps.
Suze’s three tips for beginner investors
1. Don’t put all your investment eggs in one basket.
Suze says: “Most people when they’re beginning to invest don’t have a lot of money. So, you don’t want to buy just one individual stock because if that individual stock happens to go down – and it can happen – there goes all your money. Diversification is the key.
“How do you diversify if you don’t have a lot of money? By buying either a no-load mutual fund or an exchange-traded fund (ETF). An exchange-traded fund operates like a stock but it’s really a tracking index. Either one of those two is a great way to give you diversification.”
2. Dollar cost averaging is the key to success.
Suze says: “Nobody is going to be able to call the market correctly at the moment it’s happening. You’ll never buy at the lowest point and you will never sell at the highest. But, what you will do to be a winner is to do dollar cost averaging.
“What that means is decide on a specific dollar amount that you want to invest – let’s just say it’s $500 a month, or $200. It doesn’t matter what it is. You take that specific amount of money every single month and you invest it in your no-load mutual fund or an exchange traded fund if there isn’t any commission to buy that exchange-traded fund. You do that every single month. When the market is up, your dollars will buy less shares. When the market is down, your dollars will buy more shares. But, over time, you have averaged the cost of those shares and, in the end, you will have accumulated more shares. When the market goes up, you will have made more money. Dollar cost averaging is the way to go!”
3. Start early and start right
Suze says: “The sooner you can start investing, the better you are. There’s the timing of the market – when to buy and when to sell – but the most important time in every single one of your lives is the time to start investing. Time is the most important ingredient in any financial freedom recipe. Time will determine how much money in the long run and really get to keep as well. So, the sooner you begin investing, the better off you’ll be!”
Watch the video above to get more insight from Suze Orman!