Investing Without Risk- You Don't Have to Gamble

Part of being a smart earner is knowing what to do with the money you make. Investing can be a smart way to make money, but investing without risk is even better.

Who's Teaching About Money?

One of the greatest tragedies in our schooling system is that money management is rarely if ever taught. As a result, millions of people struggle with debt, when most of it could have been avoided with a little bit of training. 

Simple concepts, like spending less than you earn and budgeting, have often fallen by the wayside. And let's not get into the abuse of credit cards! (Hint: If you use a credit card, pay off the full balance each month. Otherwise you're losing money paying interest, and the longer you go, the more you lose.) 

 One person who's teaching about money is Daniel Solin, a wealth adviser and author of The Smartest series, two of which I'm recommending below. I've read several books on finances, but these have been particularly helpful.  They're not complex or complicated. They just offer some good wisdom and practical advice.

I Wish I Had Read This Decades Ago!

The Smartest Money Book You'll Ever Read: Everything You Need to Know About Growing, Spending, and Enjoying Your Money is a no-nonsense but full of common sense book with practical advice for investing, saving, and getting out of debt. It covers issues like what to look for when buying insurance, whether you should buy or rent a house, how to plan for retirement, and staying out of debt.

 It's all written in a simple manner that anyone can grasp. If you already have good financial knowledge, don't expect to find much that is new or technical.  But that's what I liked about the book. It's easy enough to grasp at a beginner level.

Solin's other book, The Smartest Investment Book You'll Ever Read: The Proven Way to Beat the "Pros" and Take Control of Your Financial Future,  is something I wish I had read decades ago. Investing without risk is the theme, and much of the book is a slam on Wall Street and all the "expert" advice out there.

The bottom line is that investing in individual stocks and bonds is too risky to be done with your hard earned money. Instead, Solin explains what index funds are, and recommends specific ways to invest without risk.

Again, it's pretty basic stuff for those who are well-versed in financial management. For me, it was like light bulbs going off. It made all the sense in the world.

The book is quite entertaining, as Solin reveals much about the brokerage industry and how it's often working more for their own interests rather than the interests of their clients. I say it's entertaining because I just kept shaking my head in astonishment, enjoying the discovery of truths everyone should be aware of. A real expose.

But if you're not interested in all the expose, Solin tells you to just skip to part four in the back of the book where he gives you a four step process for investing wisely.  This includes:

--Determining your asset allocation (and he explains what asset allocation is)

--Opening an account with a fund family like Fidelity, Vanguard, and others

--Selecting investments (and he gives specific recommendations)

--And rebalancing your portfolio from time to time

Solin stands solidly for index funds. Index funds are not risky like individual stocks and bonds because they are a part of a collection of securities, like mutual funds.  Thus if a single stock does poorly, it will likely be balanced out by others that are doing well.  Mutual funds have this benefit as well, but mutual funds are more expensive. They're also managed actively, which means a higher turnover and more capital gains tax. Index funds are simply created according to a stock market index, like the S&P 500 for example, and will perform accordingly.

Solin puts it all in easy to understand terms, which is why I recommend these books. They are helpful to the layperson who wants to make his money grow, but doesn't want to take chances with unpredictable stocks.

What about you?  What might you recommend for making wise investments without risk?