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Recently I had the opportunity to interview Manisha Thakor, a personal finance expert for women and co-author of the book Get Financially Naked. I asked Manisha to share investment tips for women to make our money work hard for us. She had five key pieces of personal finance advice for women:
- First off, protect your money. Only invest money that you don’t have to spend for at least 5 years. If you can’t afford to let that money sit still in an investment for at least 5 years, you are not ready to invest. Instead, you should protect that shorter term money from the ravages of inflation in a savings account, money market account, or CD.
- For your 5 year plus money, keep it simple. I’m a big fan of index funds and target-date retirement funds. Only invest in individual stocks or bonds if you are willing to treat it like a second job and put in serious time to research the underlying companies. If that’s not your cup of tea (and for most people it’s not) mutual funds – and especially index and target date funds – are the way to go.
- Keep costs low. When in doubt in selecting between funds, 99% of the time the lower cost fund is the best choice. It’s what you keep after taxes and fees that you have left to spend.
- A solid rule of thumb for women is “110 minus your age.” This is a good target for how much to put in stocks. So if you, like me, are 40 years old you’d target having 70% of your 5 year plus money in stocks and the rest in bonds and cash.
- Once a year, review your portfolio to see if any changes need to be made based on changes in your life circumstances. The investment mix that worked for you at age 30 is not the same one you’ll want at age 50 so it’s vital to review your investment mix (“asset allocation” in fancy pants investment speak) annually.
Personal finance does not have to be a scary thing. Make 2010 the year that you better manage your finances and own your financial future. If you need help getting started, read Get Financially Naked by Manisha Thakor and Sharon Kedar. My full interview with Manisha can be read here.
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