D.I.Y investing

10 investment tips for women over 50

Posted on www.vibrantnation.com Friday, February 05, 2010 by Alice Schroeder William Buffett biographer and finance professional Alice Schroeder spent two thousand hours with the subject of her book The Snowball: Warren Buffett and the Business of Life . Here's her investment advice for vibrant women.

1. Do not be intimidated by your money and how to invest it. This is not rocket science.

2. As the example of Bernie Madoff shows, you cannot delegate investing to someone else. There are lots of stockbrokers who want to pat your hand and say, "Everything's taken care of" and have you just leave it to them. Don't.

3. If you will devote an hour or even 30 minutes a day to doing some reading about investments, you can learn enough to follow your own advice about what to buy. There’s so much free information available. Read. Just read.

4. Figure out some simple guiding principles. Good ones include:

• Do nothing in haste
• Focus on not losing money more than on making it
• Be aware of your time horizon. If you’re going to need the money in five years, don’t invest in anything where the market’s price in five years could wipe you out.
• While diversification doesn’t always work, putting all your eggs in one basket is not a good idea. Putting all your 401K money into your employer's stock is a big, huge, horrible mistake.

5. Suze Orman gives very good, practical advice. Reading a book by her would be a wonderful place to start. She explains it in plain English, and women should absolutely feel empowered to do this stuff themselves. Plus, it gives you this feeling of security to not feel at the mercy of other people.

6. There’s no silver bullet. I can't say, "Do this and your troubles are solved." There’s no certain thing.

7. Prepare for inflation. Most of us remember the 1970s, when it was not a good time to be invested in things like 30-year bonds. Given what the Treasury Department is doing with its printing press right now, people should really think hard about the chances of high inflation coming back. So if a broker tells you to have a portfolio made up of all these municipal bonds with 10- to 20-year durations, just type into Google "municipal bonds + inflation." You'll find that’s not a good combination!

8. Don’t overcomplicate.

9. Find out how the person selling you any kind of financial product gets paid. Let me give you one horrible example. Most stock brokerage firms right now charge what are called "wrap fees," which means they charge 1% of the assets in your brokerage account. All over this country, people have pulled their money out and put it in money market funds that are sitting in these brokerage accounts earning .5%. They’re earning a half a percent of interest, and they’re paying 1% to their brokerage firm, meaning that they’re getting a negative return of a half a percent.

It ought to be illegal for a brokerage firm to take 1% of your money for you to have it sitting in a money market fund that’s earning less than you’re paying them. They’re not doing anything to earn you any money. It’s outrageous. So understand how people are getting paid, and what they’re getting paid to do. It’s the most important thing.

People say, "Oh, the fee is 2%." You know what? It’s not 2%. If you’re earning 5%, the fee is 40%!

The amounts of money that can be made quickly, by means that are not very honest, attract a certain kind of person. And, while I know many honest people on Wall Street, it has, compared to the general population, a higher percentage of people who have an opportunistic way of thinking about other human beings. And women usually are not treated very well by that type of person.

With all of that said, I will tell you that many financial advisors -- and I know a lot of them -- want to do a good job for their clients and are pressured by their employers into selling products that earn the highest fees, and into giving advice that is not, really, the best thing for the clients. Many of them agonize over this, because their livelihood depends on keeping their job and doing these things. I’ve received heart-rending emails. I received an email from someone who said he cut trees down part-time to make a living rather than do some of the things that his stock brokerage firm would have him do. So it’s the system that's the problem, not just the people.

So, again: Find out how the person selling you any kind of financial product gets paid. Just be ruthless about that.

10. Make people stop talking fast. If you will sit down and take a piece of paper and write down numbers, all these things will reveal themselves. But you have to slow...it...down.