Investing For Gay And Lesbian Beginners
If you’re planning to start investing, you’ll likely have no shortage of advice, but we thought you might like some good advice — uniquely tailored to our unique community.
We asked four of the country’s top investing experts — two who are part of the gay community and two who aren’t (that we know of) — to tell us their most important advice for gays and lesbians starting to invest. They offered not just the expected broad, esoteric advice that fills so many investment magazines, but the also offered some specific advice that will get your dollars on the path to earning you more money.
“The most important thing about investing is to simply get started,” according to Shelly Meyers, the president of Meyers Capital Management and the former chairwoman of the Meyers Pride Value Fund. Meyers is a licensed CPA with an MBA from Dartmouth College. “I believe it is as important to be financially fit as it is to be physically fit.”
She said that investing in three to six well-selected mutual funds with different financial objectives is the best way to get started.
“Unless you have $100,000 plus in cash, I believe it is difficult to get proper diversification only by buying individual stocks,” Meyers said.
She also emphasized choosing investments with the proper level of risk for your age and situation but warned that risk works both ways.
“People talk about risk in the stock market. Yes, there is risk. However, the other side of the coin is the risk of having the value of your savings in a bank or money market account be depleted by inflation,” she said. “Different mutual funds have different levels of risk. The proper mix of mutual funds should give you the diversification you are looking for with a comfortable level of risk for your individual situation.”
Andrew Tobias, the now openly gay author of The Only Investment Guide You’ll Ever Need
First, spend less than you earn. While that sounds just a bit silly, it really it good advice — you can never invest unless you save some money first.
Second, Tobias recommended that you “keep your transaction costs low: index funds or a deep discount broker for the stock market, Treasury Direct for bonds.”
Third, he suggested putting whatever amount you can afford each month into three index funds — a big cap, a small cap and an international one. Index funds are mutual funds that invest in the companies that make up a certain stock market index, like the S&P 500. Since the companies in which they invest are determined by the index rather than by a highly-paid portfolio manager, the fees involved are low. Big cap funds invest in big companies; small cap funds invest in small ones.
He said following that simple method will allow you to “do very nicely over a lifetime” and to do “better than 80 percent or 90 percent of your friends and neighbors who try harder.”
He added, “Slow, steady and simple wins the race. Time and effort, oddly, don’t.”
For gay and lesbian individuals and couples, the rules of investing are not much different, according to Tobias.
“Investing is investing. If you broaden it to ‘financial planning,’ then there are legal issues of how an unmarried couple arranges its affairs,” Tobias said.
When people looking for easy-to-understand advice, they often turn to IDG Books’ … For Dummies series, and so we did. Eric Tyson, the author of Investing for Dummies, stressed the importance of being educated on investing.
“Once people have tackled the not so insignificant American accomplishment of living within their means and saving money, they should take enough time to educate themselves, even if they think they will hire help to make investing decisions,” he said. “Even if you hire help, you must know enough to be able to evaluate the competence and ethics, which often are in short supply in the financial management field, of the person you hire.”
If you would like to find out some of the most commonly made mistakes and how to avoid them, Investing for Dummies has a lengthy list.
For even more specific details, we turned to Barbara Raasch, a partner in Ernst and Young who is in charge of their New York City investment advisory services. She, too, recommended mutual funds to beginning investors.
Keeping the portion of your money that you don’t intend to use for several years invested in long term investments is important, she said, and so is keeping free the money that you plan to spend soon on something like a car or a down payment on a house.
A standard portfolio, Raasch recommended, consists of 60 percent stocks and 40 percent bonds. If you are young, the percentage of stocks can go higher; if you are later in life, you may need more of the stability bonds offer.
There are three ways, she said, to get that perfect portfolio. First, you can choose and buy individual stocks and bonds, but that’s the hard way. Second, you can choose actively managed mutual funds. They will often get you high returns, but you sometimes have to pay high fees.
Index funds, she suggests, are a third choice that offer a good return with a lower fee. Taxes are usually low, too, because the fund does not trade stocks much, making the taxable capital gains low.
“Professionally-managed funds can often beat the index, but you have to pay for it — and that includes higher tax costs,” she said.
She recommends doing most of the work yourself to save money, but she said talking to a stock broker can get you some good advice regardless of whether you invest through them or not.
“For a beginning investor, it’s really good to talk to people who get compensated for placing your money — like stockbrokers and others who get paid a commission — as long as you understand that they are trying to make money and they may not be telling you the whole picture,” Raasch said. “The information is still good.”
Our four experts agree that with a little work, you can place your money yourself. Using websites as well as magazines, books and people who get paid only if you place your money with them as sources for advice, you can do it right — and put most of your dollars into your investments rather than into someone else’s pocket.
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