In times of hardship, Suze Orman will be the first to tell you that what you don't do with your money may be even more important than what you do with it.
The best-selling personal finance author and TV personality has seen it all in her decades-long career, and she has plenty of advice to help you get through the choppy economic waters ahead.
Here are five of her most fundamental tips for avoiding investing blunders so you can protect your portfolio and make it grow even during a downturn.
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Eager to escape the dismal stock market? Unfortunately, “cash is not a safe investment,” says Ray Dalio, founder of the world’s largest hedge fund. “It’s not a safe place because it will be taxed by inflation.” With the consumer price index hitting a 40-year high of 8.6% in May, you’ll need to get creative to find strong returns.
1. Don't sell stocks when markets are bad
When stocks are hurtling lower, investors tend to drop investments fast. That's a bad idea, says Orman.
Instead of dumping stock, she advises that you just keep investing the same amount of money each month, regardless of what the market is doing. Using this strategy, a bad month for the market becomes a good month to invest.
"I wish for 2008 again," she told Yahoo Finance, referring to a big market meltdown. "That’s when the fortune was made. That’s when you could buy stocks for pennies on the dollar."
If you train yourself to hold on tight through market dips, you’ll continue to build a solid portfolio with long-term earning potential.
2. Don't put blind faith in a financial adviser
It's important to have a financial adviser you can trust.
"Don’t think that they’re always going to have your best interest at heart, because probably they have their own best interest at heart,” Orman says.
When selecting a financial professional, make sure he or she is a "fiduciary," which means your adviser has a legal duty to act in your best interest.
During your vetting process, ask prospective advisers about how they'll be compensated for working with you, and about other services they can offer. This will give you a good idea of their motivations when they invest your money.
3. Don't invest for the wrong reasons
Orman says too many people — especially young people — make investment choices purely because a stock seems cool or trendy.
"They decide, 'This company is great, I'm going to invest in that,'" she told CNBC in 2018. If that's your strategy, "maybe you'll hit it right, maybe you'll hit it wrong."
It's less risky to diversify your investing, by putting your money into index funds and exchange-traded funds, or ETFs.
4. Don't be too quick to buy a home
Homeownership is a big part of the American dream, but today's mortgage rates might make some people think twice.
"Sometimes it makes sense to own a home," Orman told CNBC. "And sometimes, depending on where you live, it makes sense to simply rent."
If you're in an expensive city, Orman says why not invest in the stock market instead of pouring a lot of money into property?
That way, you can grow your savings — maybe into a down payment on the home of your dreams.
5. Just don’t sell stocks — period
Orman speaks from personal experience. In 1997, she invested around $5,000 in Amazon. She sold the stock a few years later and quadrupled her money.
However, the shares would be worth millions today. "It makes me sick to even tabulate it," she told CNBC.
Investing in individual stocks isn’t her favorite game plan, but she says people who play the market should at least do extensive research on the companies they’re interested in. She says Google, Facebook and others are expected to retain their competitive edge for years to come.
“If you do buy, though, make sure to hold," Orman advises. "You keep a great stock forever."
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.