Financial Tips for My 20-Something Year Old Self- Tip #3: Understand Your Investment Options and DIVERSIFY!

    If you had asked me when I was 22 the difference between a stock and a bond, my response would have been, “Do I really need to know that?”.  Ok, that might be a bit extreme, I’m pretty sure I knew the difference then, but my point is that I didn’t care to understand how investments really worked.

    When I started participating in my first 401(k), I had no clue what investments to pick so I’m pretty sure I just invested 100% in my company stock at the time. If not 100%, it was definitely a large majority of my portfolio. Let’s think about this, I started investing in my first 401(k) around 2006…guess what happened a couple of years later…the Great Recession. How do you think my 401(k) held up? Not so great to say the least.

    The lesson to be learned here is if you don’t know much about investments, take the time to research your options and get a basic understanding of what’s being offered so you can diversify your portfolio instead of putting all your eggs in one basket and watching them get crushed when there’s a significant market downturn.  Or, if you really don’t care to do the research, at least ask someone who you trust knows what they’re doing for help.