What important things does a 20 year old need to know about money and finance?

Answer by Doug Davis:

1. Become financially literate: WSJ, CNBC, Bloomberg, LearnVest – Where Life Gets Richer, etc.
2. Learn about possible investment vehicles: 401k, Roth IRA, Savings Accounts, etc. – Educating the world about finance
3. Identify an amount you are comfortable saving each month and put it in the proper savings vehicle.
4. Don't be scared of the market, you have 40+ years of savings.  Don't get antsy when the markets drop, this is sometimes a great time to buy into the market at a cheaper valuation.

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What important things does a 20 year old need to know about money and finance?

Answer by Pat Roberts:

God, please grant me a time machine so I can go back and redo this one:

Humans are collectors. We love to collect stuff. We're all going to collect something: comics, video games, movies, action figures, 12" singles, cool gadgets – well that was my list at 20.

Saving money is boring and you should try to do it especially if you have an employer that will make matching contributions. But you can't see and feel that money unless you keep it stuffed under your mattress, and then it's just losing value like your action figures and video games.

A friend of my father tried to get me started collecting bullion. He gave me a 10oz silver bar for graduation. It was sort of interesting, but I didn't really think much of it. I just put it in a box and forgot about it. I have a very good friend who, instead of collecting BS like I did (the majority of which is worthless now) collected bullion. He started with silver, then later when he had a better job moved to gold. Years later when I reconnected with him he showed me his collection. He was like a f'ing pirate with a treasure. And while I spent money on crap that ultimately became worthless, he semi-retired at 40, able to use his bullion stockpile to secure low-interest loans for investment projects and an awesome house.

Bullion gave him something he could touch when he needed that connection to a collection. There's all sorts of interesting bullion available near spot (market) price. You can even buy and sell bullion recovered from shipwrecks at fairly standardized prices (2x spot).  It becomes addictive too… do you really need those 2" pipes for your car or would you rather have another bar of bullion?

Here's a link to get you started: http://www.apmex.com/Category/50…

Don't buy 'collector' coins. Buy the bullion based on spot price and if you happen to buy something that goes up in value as a collector item think of it as a bonus. The metal will always be worth the value of the metal.

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I’m 18 years old and want to learn how to invest my money. How do I get started?

Answer by Adena DeMonte:

  1. If you have a job, start a Roth IRA. You can do this easily at a place like Vanguard Group or Sharebuilder. If you have $1000 you can put it into the Vanguard STAR fund which has a $1k minimum, which I recommend if you want to test the waters. The other funds all have $3k minimums. You can also open a Roth IRA at Sharebuilder with no minimums. It's better to invest larger amounts up front due to fees, however. You can invest up to $5k per year as long as you've made that much in the year. If you have $3k to start with you can put it into one of Vanguard's other basic and diverse index funds, or one that is set for your retirement year. Max that out for the year before you think of investing elsewhere. (If you aren't earning income then skip this step or try to earn $5k per year.)
  2. if you happen to have a job with a 401(k) with a match, first put your investment money into that. Since you're 18 I'm going to guess that you don't given 401k matches are impossible to find these days, esp for younger employees, but I could be wrong. If you do have a match, once you hit your match, put the money into the Roth IRA.
  3. Read  personal finance blogs. Get different perspectives on investing. I started out mostly investing in Index Funds and Exchange-Traded Funds (funds that have lots of different stocks that are similar either in size, industry or some other commonality) and have since become a stock investor — but not day trader. Mutual Funds, which are basically index funds that are managed by someone who thinks they can out smart the market, are generally expensive over the long run and not worth it. Some may perform really well, but others perform poorly, and you can perform really well and/or poorly on your own. Just don't be stupid and put all your money on any one company…
  4. Don't put all of your money into any one thing or any three things. Diversify. Figure out your risk tolerance. Don't day trade unless you want to spend a lot of time learning how to do that and like a lot of risk. I don't have the time for it, so I don't do it. Even though I own ~90 shares of Apple stock, I've forced myself to purchase shares of other industries and companies at the same time. If I had put all my money on Apple, I'd be better off today, but tomorrow if the stock crashes I have plenty of other companies that, as long as there's no apocolypse, should perform ok. It seems it's a good time to invest now since the economy is still recovering. The worst time to invest is when the economy is doing really well and everyone thinks the market will keep going up.
  5. Long term Capital Gains Tax — which is the rate all of your gains on your stocks and other investments will be taxed at if you leave them in your account for at least a year after purchase — isn't that bad at its current rate of 15%. If you're not making a lot of money now the % for capital gains tax may be equal to or more than your actual tax bracket. If your tax bracket is 25% or more, then the 15% will be a large benefit for saving.
  6. Ask your parents, 30-somethings, and other folks older than you what they wish they knew about investing when they were 18. Take notes. Don't listen to everything they say, but find commonalities and do those things.
  7. If you want to get into stock investing, sign
     up for an account on SigFig / Wikivest.com and start tracking the stock of
    companies that you think are successful. Pay attention to the company's
    Price-to-Earnings Ratio (P/E). This shows if the market is overpaying
    for a stock. You can also see if the stock is trending up or down. Of course you can never know this for sure, as if a company
     grows extremely fast a high P/E could be a good thing. Right now
    Amazon's P/E is 144, while Apple's is 17.60. While Apple seems to be
    expensive, you can tell it's not that expensive looking at the P/E
    number. There are many other stats to look at — but I think P/E is good
     to understand. It's what kept me invested in Apple when it went from
    $250 to $300, then $400, then $500 and now over $600 a share. Some
    people probably thought it was getting to expensive, but in comparision
    to other stocks, esp given it's quarter-over-quarter growth figures, it
    was (and maybe still is) cheap.

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I’m 18 years old and want to learn how to invest my money. How do I get started?

Answer by Cinjon Resnick:

I was in a similar position once. Here's what I did:

Read The Intelligent Investor by Graham. This is your go to and will give you a good frame for how to think about investing (like an owner) and how to think about the markets. Graham is considered the grandfather of value investing and was Buffett's direct teacher. Try to get the one with the Zweig commentary because it updates it for today's environment.

Then read Margin of Safety by Klarman, who has done incredibly well leading the Baupost fund since the late 80s. It expounds mostly the same ideas because Klarman follows Graham's teachings but also has his own touch that is quite different from anyone else. It's very hard to reverse engineer Klarman's plays. This book is also great because of its near current examples (early 90s).

Then one more book and that's You Can Be A Stock Market Genius by Greenblatt. Terrible name but great book because of all of the special situations (these aren't unique, but are a way of identifying specific investment plays like spin-offs or mergers) it details and how to take advantage of them / what to look for.

Ok, that's three books which should take ~2-3 months. After that, start investing in things you know and understand. If you don't understand anything, then start researching.
But while doing it, the best education you can get is to be reading the Buffett Partnership Letters and then the Berkshire Hathaway Annual Letters. These span 40+ years and are a goldmine of investing and business education. I strongly encourage this last step, especially for people new to investing and those without the time to focus on anything but their industry of choice.

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How can I better apply what I’ve learned about life?

Answer by Shikhar Agarwal:

I have this question's tab opened since more than a month! Finally my answer! I have mentioned some ways to applying stuff which directly answers "what can I do" part and indirectly "Why does this happen".

 1. Stop Procrastinating
I believe u have read about this and have also noted this down already. Didn't apply and now again reading! This is a vicious circle – break this. If you have planned to do some random act of kindness, pick one of your followers and send him 1000 credits. NOW. Or a better idea – follow me – thanks for the kindness! 😛

 2. Come out of your comfort zone
Realize that being in your comfort zone is an excuse – not a privilege. Nobody has ever scaled heights staying in that zone. Planning to use public transportation, but can't leave your car? Give your car keys to a friend and tell him to go on vacations. Yes, I mean it.

 3. Leave laziness and Be active
Take your ass off the chair! Switch off the TV. Go for a jog. Or, go to the kitchen and help your mom. Get up and clean your room. You got to be active to apply things in life!

 4. Be the change
Lot of people have this attitude –

"How does it matter if I be the change? Everyone else is same, and mine changing alone won't affect the situation"

So you read that we should not litter on roads, but still doing? I am very sorry, but you fall into this category. You have to change. You are outstanding – prove it by standing out of the crowd! 🙂

 5. Resist Temptations, or simply just cut them out!
Spending too much time on internet? Exchange your smartphone for a simple device [1]. Read that smoking is bad for health, but still cant get over it? Whenever you have the urge, tell yourself that you are not the tail of a dog (know matter what you do, it always remains bent) – and hence has the capability to change. And read this answer again 😛

 6. Ignore what others think of you
Want to go out for jogging to reduce fat, but think that people would mock you? Some would even mock you if you dont go! Want to go to a temple or dance class, but the very thought of people mocking scare you? Well dont care about these things – its your life! Remember:

First they ignore you, then they ridicule you, then they fight you, and then you winMahatma Gandhi

 7. Motivate yourself
watch movies like Chak De, Rudy, etc. Read biographies of Lincoln, Gandhiji or check this answer – Life: What are the greatest stories of triumph over tragedy? . Realize that to achieve something, you have to get motivated – either internally or externally [2], which brings me to the most important point:

 8. Know Thyself – THE most Important Thing
Forget everything. Sit. Relax. Introspect. Deep dive within and understand yourself. Why aren't you applying all this stuff? Is it laziness? or lack of inspiration? Or just pure ignorance? Understand yourself, find the enemies within and then fire missiles on them. I have mentioned some of these above. For rest, make indigenous weapons! Or mention the factor in comments – I would think about those and modify this answer!

Happy Implementing!


[1] Balaji's answer to What is it like to downgrade from a smartphone to a feature phone?
[2] Psychology: How do you rein in the mind, hold up and move on when you are at the lowest phase of your life?

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At age 25, would you pursue a good paying corporate job that makes you unhappy or a hobby that makes you happy but has no guarantee to pa…

Answer by Neil Kandalgaonkar:

I don't agree with how you define your choices.

First of all, you can change this dilemma into a more positive choice, by bringing "the bills" into play. Control your costs! There are many more possibilities if you don't get sucked into debt or a mortgage that requires a high corporate salary. (If you're in debt, your top priority may be to get out of it ASAP, which will modify the choices below.)

Next – "hobby" versus "job" is the wrong way to think about it. If you are going to focus on your "hobby", it's actually going to become your "job". Many an entrepreneur has been foiled this way – they loved baking pies, not running a pie factory, but now they're stuck behind a calculator doing payroll.

You can only know if you should be the salaried pie baker, or the entepreneurial pie boss, by knowing yourself.

And this is hard! I sympathize greatly with you – at age 25, if you've done the standard educational track we prescribe to kids, you probably know almost nothing about yourself. You've spent twenty years learning how to adapt yourself rapidly to the arbitrary demands of this course or that course. Even extra-curricular activities these days are highly prescribed and achievement-oriented, so they may not have illuminated who you really are.

So you may need to do something to figure this out. It's not wrong to take a year or two outside the corporate or student track – as long as you spend time trying on different roles, or exploring things you've always wondered about.

This is the main reason why corporate jobs are so alienating – you're working on some large scale thing and investing only a tiny sliver of your talents.

So work on something smaller where you invest the whole you. Maybe it is at your corporate job – if you're a natural wheeler-dealer, maybe you talk them into entrusting you with a lot of autonomy on a small project all your own. Or maybe it is that hobby you discuss – most people need to go outside the corporate world to get something where they can invest all of themselves.

But you know, it barely matters. I don't care if it's a student painter franchise, a Burning Man art group, a cross-country road trip, a rock band, seducing as many members of the appropriate sex as possible, learning a martial art to competitive levels, anything. Anything that requires you to rely on yourself and all your talents will show you who you really are.

A useful way to tell if you're on the right track: you accumulate stories worth telling.

Once your choices are clarified, try to design your life accordingly.

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