Suze Orman’s 5 time-tested tips to get you through inflation and stock market dips

1. Don't sell stocks when markets are bad

When stocks are hurtling lower, investors tend to drop investments fast. That's a bad idea, says Orman.

Instead of dumping stock, she advises that you just keep investing the same amount of money each month, regardless of what the market is doing. Using this strategy, a bad month for the market becomes a good month to invest.

"I wish for 2008 again," she told Yahoo Finance, referring to the big market meltdown. "That’s when the fortune was made. That’s when you could buy stocks for pennies on the dollar."

If you train yourself to hold on tight through market dips, you’ll continue to build a solid portfolio with long-term earning potential.

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2. Don't put blind faith in a financial advisor

It's important to have a financial advisor you can trust.

"Don’t think that they’re always going to have your best interest at heart, because probably they have their own best interest at heart,” Orman says.

When selecting a financial professional, make sure he or she is a "fiduciary," which means your adviser has a legal duty to act in your best interest.

During your vetting process, ask prospective advisors about how they'll be compensated for working with you, and about other services they can offer. This will give you a good idea of their motivations when they invest your money.

For those looking for an alternative to the traditional advisor, robo-adivsors offer a more democratized approach to investing by using a carefully calibrated algorithm to do the investing for you based on your preferences, risk tolerance, and financial goals. This eliminates the potential biases and alterior motives of a human equivalent, and these robo-advisors also come with a strict fiduciary duty that is regulated by the government. Such examples include:

Wealthsimple is known for its extraordinarily fast and easy 5-minute sign-up process, as they’re one of the only institutions in Canada that allow for same-day funding, while also offering no minimum investment to get started. It gets Canadian and International stock exposure from iShares, US stock exposure from Vanguard, fixed income from BMO, and dividend and real estate exposure from purpose funds. Once you fill out some information, you are assigned a portfolio that includes 8 to 10 ETFs, with each ETF representing a unique asset class, that adheres to your risk tolerance. Get $25 when you open and fund your first Wealthsimple Invest account.

Moka is an app designed to help Canadians grow wealth, whether you’re a new or experienced investor. It allows you to save and invest in the S&P 500, the benchmark index of 500 of the largest U.S. companies, currently including Apple, Tesla, and Amazon. To get started, simply create an account on the Moka app or website, decide on your investment goals and set up automated deposits on a schedule that works for you. Moka's team of professional portfolio managers takes care of selecting the appropriate funds and managing your investments. For a small monthly fee, your Moka account will automatically round-up to boost your savings, plus you get portfolio manager access, SRI funds and next-day withdrawals.

3. Don't invest for the wrong reasons

Orman says too many people — especially young people — make investment choices purely because a stock seems cool or trendy.

"They decide, 'This company is great, I'm going to invest in that,'" she told CNBC in 2018. If that's your strategy, "maybe you'll hit it right, maybe you'll hit it wrong."

It's less risky to diversify your investing by putting your money into index funds and exchange-traded funds, or ETFs.

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4. Don't be too quick to buy a home

Homeownership is a big part of many people’s dream, but today's mortgage rates might make some people think twice.

"Sometimes it makes sense to own a home," Orman told CNBC. "And sometimes, depending on where you live, it makes sense to simply rent."

If you're in an expensive city, Orman says why not invest in the stock market instead of pouring a lot of money into property?

That way, you can grow your savings — maybe into a down payment on the home of your dreams.

5. Just don’t sell stocks — period

Orman speaks from personal experience. In 1997, she invested around $5,000 in Amazon (NASDAQ:AMZN). She sold the stock a few years later and quadrupled her money.

However, the shares would be worth millions today. "It makes me sick to even tabulate it," she told CNBC.

Investing in individual stocks isn’t her favourite game plan, but she says people who play the market should at least do extensive research on the companies they’re interested in. She says Google (NASDAQ: GOOG), Facebook (NASDAQ:META) and others are expected to retain their competitive edge for years to come.

“If you do buy, though, make sure to hold," Orman advises. "You keep a great stock forever."

Sources

1. Yahoo Finance: Suze Orman to average investors: Don't sell during downturns (October 25, 2018)

1. CNBC: Suze Orman says this is the No. 1 investing mistake young people make (September 27, 2018)