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Who's in the Video
Michael Mauboussin is the chief investment strategist at Legg Mason Capital Management. Before joining LMCM in 2004, he was a managing director and chief U.S. investment strategist at Credit Suisse.[…]

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

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

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

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

The third thing is that, rnnotwithstanding our recent difficult ten year period for equities, and rnby the way, we’ve had three such episodes over the last hundred years orrn so, so this is actually pretty unusual in a longer-term context; is rnit’s very likely that stocks equities will do better than bonds over rntime and I think that’s probably particularly true today. So if you’re rnyoung and you have a long future and you’re going to be setting aside rnmoney, equities probably does make more sense than bonds. And the last rnthing is to recognize it is a big world out there. The United States is rnobviously really important in the big world; but it’s becoming less and rnless relevant. So it’s important to spread and diversify your rninvestments across the globe and to make sure that you’re participating rnin that ultimate economic growth, demographics and so forth. 
Recorded on May 14, 2010
Interviewed by Jessica Liebman