Aug 28
What Your Grandchildren Should Know About Investing
If you were to advise your grandchildren on investing, what wisdom would you pass on as sage advice? My very first words of advice is what I call “The Golden Rule of Investing” and it is, ‘Save as much as you can as early as you can.’ This requires discipline, long-range planning, denial of immediate gratification, and an understanding of the mathematics of compound interest.
When we look at the savings rate of the average American, we know they just don’t get it. Instead of self-denial of material goods, Americans go into debt to purchase things they don’t need and do it on a credit card. Paying high credit card interest rates is a sure way to dig a financial hole that is almost impossible to escape. The credit card issue will need to wait for a later piece of investment advice.
Spend a little time with a spreadsheet working out how a small investment each month will add up to be significant dollars forty or fifty years in the future. Saving is the most important factor when it comes to building a portfolio. Do it now.
Lowell Herr
Photograph: Racers and holders at Alpenrose Velodrome.