Michael Mauboussin's Investing 101

The Legg Mason investment strategist has four key tips for starting investors.
  • Transcript


Question: What advice would you give to a new investor? 

Michael Mauboussin: The first thing is to really think about your own situation to the best of your ability. So, you know, how old are you? How long are you going to be investing? What is your risk tolerance? And just try to be as honest as you can. So that’s the first thing. 

The second thing is to constantly save and invest. It sounds very simple and trite, but people that consistently save, set aside part of their compensation and invest it, over long periods of time, do very well because of the power of compounding. 

The third thing is that, notwithstanding our recent difficult ten year period for equities, and by the way, we’ve had three such episodes over the last hundred years or so, so this is actually pretty unusual in a longer-term context; is it’s very likely that stocks equities will do better than bonds over time and I think that’s probably particularly true today. So if you’re young and you have a long future and you’re going to be setting aside money, equities probably does make more sense than bonds. And the last thing is to recognize it is a big world out there. The United States is obviously really important in the big world; but it’s becoming less and less relevant. So it’s important to spread and diversify your investments across the globe and to make sure that you’re participating in that ultimate economic growth, demographics and so forth. 

Recorded on May 14, 2010
Interviewed by Jessica Liebman