MONEY Wealth

Best Advice Now for Getting Richer

Top experts and Money readers share their smartest tips for helping you build your nest egg and land a dream job.

  • Know When to Sell

    Be wary of short-term risks

    Part 1. You have to decide what type of pain you are willing to accept — a fast bleed from a sharp decline in stock or bond prices, or a slow bleed from the loss in purchasing power from earning a near-zero rate on cash.

    I’d argue the majority of investors are more likely to make poor investment decisions in a fast-bleed scenario.

    You never know the value of liquidity until you need it and don’t have it. Liquidity means holding short-term Treasury securities or short to intermediate high-quality bonds.
    - Robert Rodriguez, CEO of First Pacific Advisors and co-manager of FPA Capital. His fund beat the market in the 2000-02 and 2007-09 bears, and he fears there could be another downturn

    Part 2. The common misconception is that there is a close link between the economy and investment performance. Right now, the economy is expanding at a pedestrian 2% pace, unemployment is a very high 7.5%, and corporate profits are barely growing. Yet stock prices are up a whopping 15% from the beginning of the year.

    The market has gotten ahead of the slowly improving economy. So don’t buy stocks now expecting a short-term gain. Buy stocks for the long run.

    Even through the inevitable ups and downs in the economy, the prospects for American companies are about as good as they get.
    Mark Zandi, chief economist, Moody’s Analytics

    Know when to sell a loser

    The real secret of investing is to keep your losses small. So many people hang on to a bad investment for too long, in the hopes they will break even. Make sure you have a specific sell point planned out. The number is up to you.

    I personally wouldn’t hold onto a stock fund past a 10% drop from a high, but there’s no magic in that number. The magic is in having the discipline to follow through.

    If the market then shoots up, you’ve lost opportunity, but that’s not as bad as the losses you could suffer if your investment keeps dropping.
    Ken Sleeper, portfolio manager at the Sierra Funds

    Related: Readers weigh in with their Best Money Advice

  • Retire With a Safety Net

    Protect yourself against inflation

    The proposition that stocks are a hedge against inflation is a fallacy. During the 1970s, when the consumer price index doubled, stocks lost value in real terms.

    So people concerned about preserving the purchasing power of their savings should buy U.S. Treasury Series I savings bonds. I bonds provide the ultimate in long-run liquid financial security because they pay the inflation rate.

    Right now, a regular six-month Treasury bill is paying less than 1/10th of a percent. I bonds pay the inflation rate, which ran at 1.1% over the last year.
    Zvi Bodie, management professor at Boston University and author of Risk Less and Prosper: Your Guide to Safer Investing

    Want to retire before 60? Think massive cuts

    The cost of two people living 20 miles from work compounds to $125,000 in lost wealth every decade.

    It is usually worth moving, even within the same city, to cut a commute. I moved across Denver to eliminate a 25-minute drive. I once measured that it took only about 80 hours of work to sell a house, buy a new one, and move.
    Mr. Money Mustache, a 38-year-old blogger who saved aggressively, bought stocks and properties, and retired at age 30

    How cost cutting helps

    Savings needed to generate $39,200* in retirement income: $980K
    What you’ll need if you spend $8,000 less a year: $780K

    Best tool: Use the savings bond calculator at TreasuryDirect.gov, where you can also buy I bonds.

  • Retire When You Want

    Insure against outliving your money

    It’s really tough to figure how much you should take out every year because you don’t know how long you will live. Longevity insurance is a good option. It is a deferred annuity. You can buy it at retirement so that some money will kick in when you turn, say, 85. That gives you a set number of years you can plan for.

    The costs aren’t that expensive since the insurer gets your money for a long time, and there is a chance you might die earlier than expected.
    Alicia Munnell, director of the Center for Retirement Research at Boston College

    Make sure you can work at long as you want — and need — to

    When you are in your forties and fifties, you have to invest in your health and skills the way you invest in your savings.

    If your health is not up to par, you won’t work. You have to work harder to stay in shape and stay competitive. That runs counter to the mythology of slowing down and relaxing. Carpal tunnel syndrome is not a reason to give up work. Buy some voice software!
    Joseph Coughlin, director of the Age Lab at MIT

    Why you need to invest in your health

    Age workers expect to retire: 65
    Age workers actually retire: 62*

    Squeeze every penny out of Social Security

    If you retire early, your benefits will be reduced by about 6% for each year you are younger than the full retirement age. Most people don’t realize you don’t get the maximum benefit even when you reach full retirement age.

    The benefit keeps growing at about 8% a year until you reach 70. So the longer you wait to claim — until age 70 — the bigger the benefit.
    Jean Setzfand, vice president for financial security, AARP

    Best tool: To estimate your future benefit, go to ssa.gov/estimator.

  • Become a Millionaire

    Make plans to get to $1 million …

    After interviewing over 1,200 self-made millionaires, I’ve discovered that the fastest path to joining them is by building your own business.

    Match your education, talent, and passion to a business that solves a problem. The bigger the problem, the richer you will get.

    Find businesses you can launch inexpensively. Start part-time. If you don’t know how to write a business plan, ask the Small Business Administration for free help. The only obstacle is the mental toughness it takes to persist.
    Steve Siebold, author, How Rich People Think

    … Start by raising funds on Kickstarter

    Our first Kickstarter campaign, for our American-made men’s underwear, raised almost $300,000, but it cost more than that to fulfill the orders. So think through your costs before setting a goal for crowdfunding your project.

    The video you produce to make your case should also tell a story that viewers want to be a part of. I wanted to be the next Ralph Lauren, but that’s not a story people would get behind. So our video was on reigniting U.S. manufacturing.
    Jake Bronstein, founder of apparel company Flint & Tinder, whose Kickstarter.com campaign to launch the company’s Ten-Year Hoodie product line raised more than $1 million

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