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Editor's note: Today's piece is a little different. It's an edited transcript from a recent episode of Stansberry Radio, a weekly show hosted by Porter Stansberry and his longtime friend Aaron Brabham. As it turns out, a younger audience is tuning in. Porter offered them a few common-sense tips... And whether you're 20 or 80, we think they're worth noting... Two Simple Money Rules All "20-Somethings" Should KnowBy
Friday, October 12, 2012
Aaron Brabham: So Porter, it turns out we have a new demographic that we never sought to attract... the 20- to 25-year-olds.
I love it, personally, because I feel like this could be the next generation of conscientious voters and good investors. These people could have some good sense about them if they keep listening to Stansberry Radio...
Porter: I think it's great. The young people I correspond with seem to be extremely smart, very normal people...
For the young folks out there, the single most important thing you can learn at your age has nothing to do with investing, per se...
It's simply this:
It's that simple.
If you just go to work every day, try your best, build a career, save money – save 20%-25% of your income – and don't get into debt, then by the time you are 35 years old, you will be well ahead of the game.
By the time you're 40, you can be a millionaire, easily. And you don't have to do anything with investing beyond corporate bonds, municipal bonds, local real estate deals. There is no reason for you to become a stock trader or an options seller or anything like that. You don't have to do that, and I wouldn't recommend you do it until you can do it full time.
Now, let's say you're 55 years old, you're retiring. You've got 40 hours a week to spend on your investments. Fantastic! You can do the options stuff. You can start getting into the junk bonds. You can learn to trade the junior mining stocks, which is hard to do but can be very lucrative.
But if you're 20-something right now, don't waste your time and energy with all that stuff...
You can read about it, you can learn about it. That's great. But just focus on increasing your income by building a career and/or having a part-time business of your own and living beneath your means.
Now here are some easy things to avoid: Don't ever borrow money to go to college. College is a waste of time to start with... why would you borrow money to waste time? It makes no sense.
Secondly – and this is the trap that a lot of people fall into, Aaron – they want a huge house. They're 28 years old, they're 30 years old, they get married. They have a kid, and they believe, therefore, they've got to have a house, the house, and they go crazy into debt to buy it.
Don't do it. I swear, you don't have to do that. If you just focus, instead, on living within your means, you can buy a small condo. You can live there for five years until you can afford to buy a small house. And by the way, I said buy. I didn't say mortgage. I said buy.
If you become dedicated to never getting into debt, your entire financial life will be brilliantly successful. If you can't avoid the temptation to get into debt, there's a 50/50 chance that you'll never make it. So what's the best thing you can do to increase your odds at financial success?
Simple. Live within your means... avoid debt. But guess how many listeners will follow that advice...
Aaron: I hope at least one does... because guess who didn't do that? This guy. Two thumbs pointing up at myself...
I was in a sales career path. And sales dangles the carrot in front of you because you can make some good money. Man, it is nice to get those big checks, but then... you want to keep up with the Joneses. You've always got somebody – maybe one of your friends – who's a little bit better off than you, who you're chasing after. It will get you off-track quick...
But I'm a minimalist now. You know this, Porter. Now, I save like crazy. I live way below my means. I have zero debt, and I've never felt better. I sleep better now than I've ever slept in my entire life.
Porter: The thing I want to tell young people is that unless you can do it on a full-time basis, you don't need to start investing yet...
Sure, some of your money should go into high-quality, blue-chip, dividend-growing stocks. Absolutely. That's part of your savings program. You can do it via your 401(k). You can do it with an IRA. I'm not saying avoid stocks all together. But I'm saying most of your money should be in corporate bonds, municipal bonds, gold, silver, and rental real estate.
More importantly, figure out how to avoid being in debt. There is an easy way to do it. Just say, "I'm not going to borrow money." Then everything else in your life will become a lot more simple... You're not going to be shopping for a new car, for example. You could buy a decent car for $2,000. Why would you borrow $20,000 to buy a new one? It makes no sense.
If you really want to be rich, the first step is: Don't ever borrow a penny. As soon as you understand interest, you will only be a lender. You will never be a borrower. Out of all the things I did right financially, that was the most important one.
The second step was I was dedicated to always working for myself. And if you can put those two things together, you can be rich by the time you're 30.
But I'll tell you this. There is more to life than being rich. And, Aaron, you know me... you know my story. I gave up on lots of other things in my life... for many, many years.
Aaron: A decade.
Porter: But this is what I wanted. I wanted to be rich, and I sacrificed everything else to get it. There are people out there, who are 20 years old who are listening, who say, "Yeah, that's what I want to do, too."
Aaron: But they're not willing to make the sacrifices or have the dedication to achieve it.
Porter: Right. Guess how many credit cards they have in their wallet...
Aaron: As many as the offers they've received in the mail.
Porter: Exactly. So don't tell me you want to be rich and then tell me that you borrow money all the time. Because you're just fooling yourself.
.jpg){kind=small} Editor's note: To hear this and all of Porter's interviews, arguments, and insights, you can click here to subscribe to the free podcast. You can also download all Stansberry Radio episodes from iTunes here. You probably won't agree with everything Porter says, but every episode provides investment ideas and a view of the world you won't hear anywhere else...
Further Reading:
You can find more timeless investing advice from Porter here...
To become wealthy as an investor, there are two things you've got to be able to do well...
If you've been making the wrong choices with money for decades, why not simply stop making those choices?
Market NotesSEMICONDUCTOR STOCKS ARE ON SALE From a "relative value" perspective, semiconductor chip stocks are as cheap right now as they have been in two years compared to the S&P 500.
Today's chart compares the action in the Market Vectors Semiconductor Fund (NYSE: SMH) to the action in the S&P 500. A rising chart indicates semiconductor stocks are outperforming the broad stock market. A falling chart shows the opposite condition.
The last time chip stocks got this cheap was in September 2010. The sector rallied 50% over the following four months. That doubled the performance of the S&P 500 during the same period.
Yesterday, I told readers the stock market should cap off a strong 2012 with a year-end rally. In that case, semiconductor stocks need to play catch-up. And given how oversold the sector is relative to the broad stock market, that game should start soon.
– Jeff Clark
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