Lesson 8: Use a 5-Point Investment Strategy | Paula Pant

Investing often gets compared to riding a roller coaster. One day you check your numbers and whoooooosh! You’re at the top, basking in the view. The next day, you check again, and aaaaaahhhhhhhh! You’re hurtling down faster than you were prepared for. A week later, you’re slowly climbing back up. But according to Paula Pant, host of the Afford Anything podcast, the ride doesn’t have to be quite so scary and unpredictable. In this video lesson, she offers a 5-point strategy to keep your stomach settled through the twists and turns of investing.

Invest in low-cost index funds: This is a broad, diversified chunk of stocks or bonds that is designed to perform in-line with the index it represents. You avoid the risk that comes with picking individual stocks. You’re just trying to do as well as the overall market. And over the long term, the market historically goes up.

Buy in a diversified way: You should have at least three index funds — one to represent each of the following:

A domestic stock index fund

An international stock index fund

A domestic bond index fund

Hold index funds in tax-advantaged accounts, if possible: This might include a workplace retirement account or a Health Savings Account (HSA). If it makes sense for your situation, you might use a taxable brokerage account (which isn’t tax-advantaged but provides more flexibility).

Keep on keepin’ on: Many people get excited about these topics, invest once, forget about it, and never do it again. Set up the right automations so you’re investing every month, every quarter, or every paycheck. Build habits to monitor how your money is doing.

Stay calm throughout the process: Don’t feel too excited about the highs or too down about the lows. Investing is a roller coaster ride that you’re on for the rest of your life. Trust in the process: If you put the right habits in place, you’re likely to do well over the long term.

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About Paula Pant:

Paula Pant is the host of the Afford Anything podcast, an award-winning show with more than 24 million downloads. It was named by the New York Times as one of “7 Podcasts Your Wallet Will Love.”

She is also the founder of Afford Anything, a personal finance brand with more than 75,000 newsletter subscribers.

She is a Knight-Bagehot Business and Economics Journalism Fellow at Columbia University.

Pant is frequently featured in financial media including Money Magazine, the Washington Post, Oprah.com, CNBC, Fortune, Marie Claire, Marketplace Money, Men’s Health, Real Simple, Outside Magazine, Cosmopolitan, the New York Times, and more. She’s spoken at the “Talks at Google” series and guest lectured at Georgetown University. She lives in New York City.