Personal Finance Guru Humphrey Yang’s Tips for First-Time Investors

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If you’re new to investing, these tips are exactly what you need.


Key points

  • Humphrey Yang recommends that before you start investing, you pay off high-interest debt and have an emergency fund.
  • He suggests investing in index funds or ETFs. If you want to be a more active investor, you can also add in some stocks that you like.
  • Keep a long-term perspective when investing, and avoid trying to time the market.

Investing is a smart financial habit, as it is one of the most reliable ways to build wealth. But getting started can be confusing and even a bit intimidating. There are all kinds of investment options available, and when you’re putting your own money on the line, you don’t want to choose wrong.

Former financial advisor Humphrey Yang has published several videos on how to start investing. These have plenty of valuable advice, so here are his best tips for first-time investors.

Have your financial bases covered first

It’s natural to be excited about jumping into investing and starting to grow your money. One important piece of advice from Yang is to have your bases covered financially first. There are two things he recommends doing:

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  • Pay off your debt. Specifically, make sure you get rid of high-interest debt, such as credit card debt. Debt with low interest rates don’t necessarily need to be paid in full to start investing — Yang says this is a judgment call.
  • Establish an emergency fund. This should have at least three to six months of living expenses.

Completing these steps ensures you’re in a good position to invest. If you’re paying, say, 18% interest on your credit cards, paying those off would be a better use of your money right now than investing. And every adult needs emergency savings. If you decide to invest your money instead, you may be forced to sell those investments to cover any unplanned expenses.

Invest in index funds or ETFs

Yang provides plenty of advice on investing in stocks. However, he also says that “for an average or a beginner investor, if you stay away from picking stocks, you’re almost gonna perform better.” Instead, he suggests either of the following:

These are investment funds that contain a large basket of stocks, and they make it super easy to invest. All you need to do is buy the fund of your choice. Then, you’ll have a diversified portfolio that’s not overly reliant on a single company.

Lots of investors put the bulk of their money in S&P 500 index funds, as that index tracks 500 publicly traded leading US companies. You can usually find these, as well as many more quality fund options, with any of the best stock brokers.

Sprinkle in some individual stocks — if you’re interested

There’s nothing wrong with having a portfolio made up entirely of investment funds. This is generally a low-risk option that provides solid returns without requiring much work on your part.

But maybe you’d also like to pick stocks and take a bit more of an active role in your portfolio. In that case, Yang has a strategy he calls 85:15. Put 85% of your portfolio in passive investments, like those aforementioned index funds and ETFs. The remaining 15% is for individual stocks that you feel have growth potential.

Don’t try to time the market

A common investing mistake is trying to time the market. It sounds reasonable in theory. After all, there’s no more effective way to invest than “buy low, sell high.” The problem is that timing the market is just about impossible, and the people who try to do it often miss out on the days with the best returns.

Yang’s preferred method is dollar-cost averaging, where you invest equal amounts at regular intervals. For example, you could invest $500 on the 1st and 15th of every month. This takes the guesswork and stress out of investing.

Keep a long-term perspective

If there’s one thing to always remember when investing, it’s to keep a long-term perspective. The market goes through ups and downs. Yang says a mistake he sees from investors of all skill levels is panic selling during market downturns. And unfortunately, 30.9% of investors who panic sell never re-enter the market.

Don’t look at investing as a way to make some quick cash. Your portfolio might appreciate in value right away, or it might go in the opposite direction. Look at investing as a way to build wealth over a span of 10 years or longer.

Investing well is a lot easier than you might think. Start from a strong financial position, with an emergency fund and without any expensive debt. Pick some low-fee investment funds and potentially stocks that you like. From there, it’s just a matter of continuing to invest regularly over a long period of time.

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