Buying a home as an investment
A home might look like an investment, but it can get pricey, Bera says. “I'm anti-home-buying right now for a lot of millennials,” she says. “A lot of people value mobility over staying in one place. But if you get a job in another state and you have to move, what if it’s not the right time to sell your home? Then you’re going to rent it out, and you’re going to pay a property manager to rent your home. And if you sell, you’re going to have to [pay to] fix it up.”
Because people often like to buy new furniture for a new house or a remodeling job, Bera says they might be forced to dip into their emergency savings. And that's not ideal, as your emergency funds are for real times of need, and not just when you need to not have kitchen cabinets circa 1973 to put your feng shui in balance.
Not paying attention to fees
Buying mutual funds as part of your portfolio is great, but make sure you're not getting fleeced on the fees. Managed mutual funds (that is, those that have a "fund manager" choosing the stocks or bonds) have an “expense ratio usually around 1%.” This 1% will get in the way of you becoming a member of the 1%.
Some people believe that a good fund manager can outperform the stock market, and that paying the fee is worth it. Bera offers a counterpoint. “There’s a lot of mutual-fund managers that have underperformed,” she says. “They have good returns, and then they don’t. I’d rather just be tracking the index [Editor's Note: a selection of stocks like the S&P 500] and paying less fees.” For low-cost index funds, Vanguard has a good selection, and Morningstar can help you figure out how much you're paying on your existing funds.
Compound interest can be a beautiful thing. If you invest $100 and make 10% on that money in your first year, you have $110. Then if the next year you earn another 10%, you make $11. Your interest earned interest! Sadly, compound interest isn't all great if you have a bunch of student loans outstanding. “If you’re holding a ton of debt in your 20s and 30s, compound interest is working against you,” Bera says. “If you’re putting money into your 401k or Roth IRA, that’s compound interest working for you.”
But none of the good compound interest can happen if you don't start a retirement account and take advantage of your company match (assuming your company has that policy in place). Bera says you can set up an account easily in a few minutes online with Betterment too, if you want to invest in low-cost index funds. So get off your lazy ass and start investing or paying off that debt. Fallout 4 can wait. OK, it probably can't. Pause it, maybe?
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Lee Breslouer is a senior writer for Thrillist, and doesn't have crappy friends. Follow him to good investment advice: @LeeBreslouer.