Submitted by Peter Guevin, Circulation Assistant
How should I invest my 401k/403b/college savings plan? Should I buy a house or rent? Will mortgage rates increase or decrease and what does this mean for the choice of adjustable versus fixed rate mortgages? Should I put my savings into a bank certificate of deposit versus shooting for a higher return with riskier investments (if so, what maturity of CD should I choose)?
There are endless tales of entertainers and athletes who have made many millions of dollars, only to go bankrupt. One can make a very good living, but if they lack financial literacy, it may be all for naught. It is easy to think that a financial advisor/mutual fund manager/real estate agent/mortgage banker can do all the work for you. But how does one tell whether these professionals are competent or incompetent? Furthermore, many of these professions are incentivized to make commissions or sales. For example, I’d be hard pressed to find a real estate agent who wouldn’t say it’s a great time to buy a home. Like so many things in life, we must be an advocate for ourselves.
Some have suggested that our school systems should increase their focus on teaching financial literacy, which Investopedia defines as: “The possession of knowledge and understanding of financial matters”. While this seems a reasonable thing, what of those who have already graduated and wish to become more financially literate?
Warren Buffett, one of the richest men in the world, described his average workday as a lot of reading. In that vein, the library has some wonderful resources to help our financial literacy.
Buffett begins his days by reading two newspapers. Most do not have as much time for financial literacy as Buffett. So, time management becomes even more important for those with other jobs to hold down. The Wall Street Journal is not only a good resource for financial literacy but also a good newspaper, period. It is the only newspaper I regularly read and it is equivalent in quality to newspapers like The New York Times. The nice thing about the Wall Street Journal is its focus on financial matters. Reading the journal will tell us where the economy is headed. If we know where the economy is headed, that will give us insight into the direction of interest rates (something that really impacts the average American—see the questions at the top of this blog).
Don’t be concerned if you don’t fully understand every line of the journal…few do. Greater understanding will come with time. Unlike many newspapers, the Journal charges for most of its online content. Fortunately, Regina Library subscribes to the hard copy of the Journal and we have an entire database devoted to it.
Another fabulous database that Regina Library subscribes to is the Morningstar Investment Research Center. Pensions are disappearing rapidly from the workplace. In their place are self managed accounts like 401k’s and 403b’s. The Morningstar Investment Research Center is extremely helpful for those seeking to pick investments for these retirement accounts or college savings plans. Simply enter the ticker symbol or name of your mutual fund or stock and it will provide you with analyst reports describing pros and cons of the investment. Morningstar also does a great job in listing the alternatives to the fund/security you are considering within their analysis sections. For mutual funds, I like the ‘portfolio’ tab, as it lists the top holdings of mutual funds. Look through these listings as many contain companies that are familiar to us all. Ask yourself if what your fund is invested in makes sense to you?
Finally, Regina Library has many timely books on finance and the economy. Read the books that interest you and this knowledge will help when you pick up the Wall Street Journal or look at the Morningstar Investment Research Center. As always, the Regina Library staff is happy to help with any questions regarding our resources.