Whether you have $20,000 stashed away or just $2, rocky economic times spread clouds of uncertainty–especially when it comes to our fiscal futures. Are bad economic times a good time to invest and save? Is there anything gay men should be concerned about as they plan for the future?
I caught up with Joshua Kennon, About.com's Guide to Investing for Beginners, for answers to these and other pressing questions about investing. Whether you're a stock expert or an investing newbie, you've got to read this:
I asked: Are bad economic times a good time to invest?
Joshua said: It is often during difficult financial times that fortunes are made. Those who have managed their affairs
well, kept their debt low, and built up cash and earning power often find themselves in the enviable
position to acquire assets at distressed prices. This includes everyone from the average worker that
continues to invest regularly through his or her 401k or Roth IRA to the small business owner that uses a
recession to negotiate more favorable lease terms on a new storefront or building... read more
I asked: Where should beginning investors start?
Joshua said: The key to building wealth long-term is to get started as soon as possible because you want to tap into the
power of compounding. Take a 45 year old that invests $10,000 per year for retirement (including
employer matching in a 401k). If he or she earns 10% on their assets, the portfolio would be worth
approximately $572,750 by the time they are 65 years old. That figure isn’t adjusted for inflation (e.g., if
inflation ran 3%, the purchasing power would be somewhere around $317,100.) Looking at that inflation-
adjusted figure so we can get an idea of actual purchasing power, you could expect to generate roughly
$17,440 in take-home income each year if tax-free municipal bond rates are the same as they are now
(that works out to $1,453 per month). It would require someone who was working full-time about
$26,830 in pre-tax salary... read more
I asked: Should gay men invest in companies that discriminate?
Joshua said: So much of this question is personal. I’m pragmatic in almost everything I do so if I were running a
foundation dedicated to preserving the rainforest, and Exxon-Mobile stock was the most attractive
investment out there, I’d buy the shares then use the dividends and capital gains to fund the preservation
goals of my charity. That’s just how I’m built. A little more than a decade ago, there was a relatively large, publicly traded restaurant... read more
I asked: What should gays look out for when investing?
Joshua said: The great thing about investing and business in general is that it is the embodiment of a meritocracy-
based society. If you do the right things and are disciplined with your capital, it doesn’t matter if you are
gay or straight, black or white, male or female, Christian or agnostic, formerly educated or a dropout, you
will end up building wealth and getting your hands on enough money to live the life you want. A lot of this is because stock certificates can’t discriminate... read more
I asked: What about gay couples looking to invest together?
Joshua said: Although the overall rules are the same, there are several economies of scale that are possible if you are in
a situation where you are settled down with the person with whom you expect to spend the rest of your
life. In everything from transportation, furniture, food, and utilities, there are opportunities to save
money because the percentage of both parties’ income dedicated to paying these bills decreases, resulting
in more capital available for investments.
The surest way to build some serious wealth as a couple if you live in a household where both parties work
is to live completely off one salary... read more
I asked: What's the one thing beginning investors should know before they start investing?
Joshua said: In the words of one Nobel Prize winning economist, successful investing should be like watching paint
dry. When investing, your net worth is not going to steadily and regularly increase like it would in an
FDIC insured bank account. Instead, there is going to be a lot of volatility. You may be down $40,000
one year, and up $80,000 the next. Stay the course, take advantage of free money in your employer
match, shield your assets in tax-advantaged retirement accounts, and be patient... read more
I asked: How can a person calculate their personal level of risk when it comes to investing?
Joshua said: The biggest determinant of risk level should be the amount of time people have to leave their money
invested. For those that are ten years or more away from needing the money, they can ignore fluctuations
in their index funds as long as they are still dollar cost averaging into their positions by adding regular
deposits at fixed intervals. Those that need their money any time in the next few years shouldn’t be in the
stock market, period. No exceptions... read more