Stock Market Investing Advice for College Graduates

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My best investing advice for someone just entering the workforce is to put in an index fund and focus on turning in a stellar performance at your job, day in and day out. Don’t spend time analyzing the market, don’t read about esoteric investments, don’t scrutinize financial statements, don’t listen in on earnings calls, and don’t research SEC filings. Don’t do any of that stuff because you won’t get the same return as if you spent that time knocking your boss’s socks off.

The only exception to this rule is if you absolutely love this stuff, which is not as uncommon as you think. If you love poring over financial statements and calculating ROI, ROE, and other fun acronyms, then ignore what I said. You’re researching it because it’s fun, not because it’s work. That changes the equation.

When you start working, your stock market investments will be a very small part of your total net worth. Your job will be the single largest “asset” you have because it’ll give you the most return on your time out of anything you do. If you’re spending hours trying to squeeze a couple percentage points out of a $1,000 stock portfolio, you’re losing. You’re losing because those hours are better spent doing a kick-ass job at work so you can get a raise and contribute even more to your nest egg.

The equation changes as you get older though. As your nest get gets into the five and six figures, time invested in analyzing stocks has a much better return. However, at that point, you’ll probably have other demands on your time and the ROI in spending time with friends and family is infinite. Let the market do the work and enjoy life!

Imagine you had a time machine and could give yourself just one good piece of advice after you graduated college, what would it be?

I’m happy to announce that this post was selected as one of the best money posts of the week in the 3rd Best of Money Carnival!

{ 16 comments, please add your thoughts now! }

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16 Responses to “Stock Market Investing Advice for College Graduates”

  1. Marx_ says:

    Invest for the long-term today for short-term gratification the day after tomorrow.

  2. I would say following the macro economic climate isn’t a bad thing and moving out of large well diversified positions into other large well diversified positions can be helpful at times.

  3. Jimmy says:

    ‘Start socking away money in retirement accounts as soon as possible. The tax benefits and power of compounding cannot be beat.’ Btw, Im 35 yo right now.

  4. I’m about to be a college graduate myself and this seems like a good idea. Investing $1,000 wouldn’t really hurt that bad but hopefully it could generate some passive income. Maybe after working for a bit you could contribute more to the index fund and watch it grow. Like Jim said, it’ll be a small part of your net worth so it shouldn’t sting that much is the market isn’t going so well just as long as you have a steady job.

  5. WRXTuan says:

    Thanks for the tip, Jim. I just started working and I am following your advice right now. I’m 22, and I’ve just started with the Vanguard target retirement fund 2050 in my IRA and when I get my 401K, I’ll start the index funds there.

  6. Andrew says:

    Don’t sleep with so many skanks.

  7. eric says:

    LOL…that’s errr…valuable advice Andrew…

    But I like Jim’s point. Keep it simple.

  8. phoenix says:

    erm…can I go back to right after freshman year, and tell myself to FINISH college? Or maybe to senior year of high school and tell myself to take the Clarkson early admission, even with the loans, instead of the (closer to parents, paid for by parents) state school? 🙂 In seriousness–don’t cash out the 401(k)!!! I was smart enough to contribute to one at my first job, but cashed out the 10k when I (left the job and moved) got divorced. And cashed out about 20k in 2004 when the company I worked for was bought out. Granted. I paid off some high interest debts, but still….

  9. thomas says:

    Imagine you had a time machine and could give yourself just one good piece of advice after you graduated college, what would it be?

    I guess it would be the winning numbers to the megamillions the drawing before it was won. Get on the 90s bubble, develop youtube, bet the next 10 super bowl champions in Vegas.

  10. Good advice. Too many young people I meet think they are better off in one stock rather than a diversified portfolio from a mutual fund. The thing is one bad move in you stock and you suffer a major loss. In a mutual fund, one down stock in a portfolio of dozens doesn’t hurt that much.

    Save the “hot stock” picks for when you have a large portfolio and can afford to set aside some risk capital that you can afford to lose.

  11. Patrick says:

    I agree Jim. Many people even older people focus on trying to get good returns in the stock market and keeping up with stocks all day instead of focusing on trying to improve what they are really good at or doing a good job at work.

  12. This is great. I actually did some of the things you listed. I guess I am off to a great start.

  13. Enroll in the company pension early, if your employer offers any sort of matching contributions. So many people in their early 20s assume they’re not going to stick around in their first or second job – but they do, and miss a few years of free, compounding money.

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