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How to Be Richer, Smarter, and Better-Looking Than Your Parents

by Zac Bissonnette

Paperback, 240 pages, Penguin Group USA, List Price: $17 |


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Book Summary

The best-selling author of Debt-Free U offers an entertaining finance guide for twentysomethings, which covers everything from buying a car to job hunting to saving for retirement.

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NPR stories about How to Be Richer, Smarter, and Better-Looking Than Your Parents

'Be Richer' By Learning From Parents' Mistakes

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Note: Book excerpts are provided by the publisher and may contain language some find offensive.

Excerpt: How To Be Richer, Smarter, And Better-Looking Than Your Parents

The One-Step Guide to the Financial Media

The media has a habit of giving extremely strange financial advice — with an almost perfect track record of god-awful timing.

In 1977, for instance, this was — and I swear to God I'm not making this up — the lead in a Boston Globe story: "If the stagnant stock market has you baffled as to where to put those extra dollars you'd like to invest, you might consider collector's plates."

Seriously. One of the best and most respected newspapers in the country recommended "limited edition" — that is, limited to however many they could find buyers for — collector's plates as an alternative to the stock market.

I've often suspected that many people choose to go into the world of financial reporting less out of an interest in economics and more out of a profound sense of repression and sexual frustration. Otherwise, how would we end up with headlines like these:

Stock Market Gyrates from Libyan Oil Crisis

Investors Pull Out on Fear Factor

Bottoming Is a Messy Process

Stock Market Probing Short- Term Bottom

10 Reasons to Wack Obama's Stimulus Plan

The moral of the story? Ignore the hype and the scare tactics, and stay the course. One study found that individuals with brain damage that impacted their ability to feel emotions actually performed better in an investment game than people with normally functioning brains. So ignore the media, keep your emotions out of

it and, if that doesn't work, consider an ice-pick lobotomy.

As a recovering member of the financial media, it pains me greatly to say this, but your best bet for handling advice on when to buy and when to sell is: Ignore all of it.

No one can predict which way the market is going to go in the short term, and only a fool would go on television and claim otherwise. The problem is that many fools do go on television every day with predictions about the market. Sometimes they're earnest, well-intentioned people but they're wrong half the time. In an article in the newsletter of the American Association of Individual Investors,

investment strategist Dick Davis puts it this way: "I believe one of the worst things that can happen to a long- term investor is to be instantly and totally informed about his stock. In most cases, spot news fades into irrelevance over time ... Big market moves may be inexplicable, but a long-term ... approach precludes the need for explanations."

You and I are simply far too young to sit around worrying about month to month — or even year to year — fluctuations in our retirement accounts. The danger is that (1) we'll waste time and stress ourselves out needlessly, and (2) we'll be tempted to bail out when the market is down and buy when it's up.

This is really hard, I know. I'm sitting here writing this at 11:34 P. M. on August 4, 2011, and the Dow plunged more than 500 points today — its biggest one-day drop since 2008. Fear kicks in and your every instinct in this situation is stop the pain and sell. It is during times like these that you have to just reread this section. You have to be strong and force yourself to sit back, ignore the noise, and wait for the long-term trends that have driven the global economy upward for centuries.

The one good thing about all the media coverage and expert prognostication is that it lends itself wonderfully to mockery. Take this gem from "Stocks are at 'critical levels,' and if we continue to break through the current levels we could be in for further selling," said Art Cashin, director of floor operations at UBS Financial Services.

As far as I can tell, that literally means that if stocks continue to go down, they will continue to go down. It's absolutely meaningless. It's like saying "Well Jim, if the Red Sox continue to score runs, the scorekeeper's gonna keep putting up bigger numbers on the board." Although come to think of it, that's actually probably something Tim McCarver has said.

My point is not to pick on Mr. Cashin. It's just that no one knows what's going to happen with the stock market in the short term, so when people try to predict they usually end up saying something pretty stupid.

A Harvard study found that the less frequently investors received information about the stock market, the better they performed. This sounds insane, and possibly even dangerous. Be a better investor by buying mutual funds automatically and reading Harry Potter instead of the Wall Street Journal? But the research shows that access to greater amounts of financial news actually results in worse performance.

So by all means, follow the comings and goings of the financial world if you find it interesting or entertaining. That's what I do. But don't let it impact your investment decisions any more than you let The Real Housewives impact your spending decisions. Set up your automatic retirement investing so that money is taken out of your paycheck each month, invest in some index funds, and then go do something else. It sounds lazy and it is, but it's the best approach.

Excerpted from How To Be Richer, Smarter, and Better Looking Than Your Parents by Zac Bissonnette. Copyright 2012 by Zac Bissonnette. Excerpted by permisison of Portfolio Penguin, a member of Penguin Group (USA), Inc.