Investing Tips from My Grandpa

I’m sure you’ve heard that money grows over time, so it’s important to start investing earlier rather than later, taking advantage of compounding interest. In highschool, my grandpa gave me a book on investing and told me if I read it, he would give me $100. As a financially motivated individual, I thought: done deal!! After reading it, I ended up handing the money right back to him, asking him to invest it into the S&P 500 for me. I lucked out because my grandfather both started my investing journey and continues to help guide me. 

Clearly, you have come to this post to learn some useful and helpful tips on investing…especially if you are just starting out. For full disclosure, I was a marketing major, am not an advisor, and do not have any financial certifications…but I do want to share some of the lessons and advice passed down from my grandpa to help you build confidence to set your future self up for success. 

Some Main Guidelines I Follow:

1. Invest for the long-term. Make investments that you plan to hold onto for at least 10 years. This will help you save on taxes once you eventually begin to pull out funds from specific accounts. Back to compounding interest and money growing over time, look at the Rule of 72. 

The Rule of 72 is a quick way to estimate how long it will take for your money to double. Just divide 72 by your expected rate of return. For instance, at a 6% return, your money would double in about 12 years.…for more information check out this link from Investopedia. 

1. Start with Index Funds. Starting out, the smartest choice for myself was to invest in index funds like the S&P 500 or the Fidelity Total Market (at this moment I use Fidelity for my accounts, clearly). When looking into index funds be careful to check that they are low-cost. The main reason why I started here was because index funds gain higher long-term returns than most other funds. These funds are “safer,” more reliable, and consistent over time.
2. Look for High Dividends. One of my grandpa’s favorite “safer” ways to invest is by choosing a company that gives back high dividends. From what he has shared, he doesn’t usually choose anything with a dividend lower than 2.5%. When evaluating, he recommends looking for dividend percentages from 2.5-7%, with 3-5% being an ideal range. When doing more research on sources like Yahoo Finance or Fidelity check to see if the company has raised their dividend over the past few years. Here, we are essentially seeing if the dividend rate is good. He likes the idea (as do I) that even if the market is fluctuating, he is still making money on dividends to reinvest.

Tip --> Calculating Dividend Growth:

3. Company A’s dividends were 3.75 in 2019 and 4.94 in 2024.

—> New (4.94) - Old (3.75) = 1.40

—> 1.40 / Old (3.75) is roughly .40, so for 5 years…

—> .40 / 5 years = 0.08 OR an 8% average growth per year

 

So, how do you know what to buy and what not to buy? Investing is a personal thing and I believe that through time and research you will find the best methods, stocks, funds, etc for yourself. However, when thinking about investing money into something new, I do my research…and call my grandpa of course! Compare what analysts (such as Jefferson, Argus, and Zacks reviewers) say, check resources like Morningstar Ratings, and regarding funds, I compare them to the S&P 500. 

If you are thinking about saving money and beginning to invest, just do it! If you are worried about losing your money, find companies or funds that are safer. If you are wanting to jump into stocks right away, power to you. Do your research, compare, and make your best judgment. Something to look at here is the equity summary score with 10 being the highest recommendation, 6 being average, and less than 6 implying it is not highly recommended by their analysts (when researching through Fidelity). Then, you can look through comparisons between other stocks in the industry, see the performance over the last 52 weeks, and the volatility (or “beta”). With the beta, it is compared to the S&P 500 with anything less than 1 being more undervalued and anything over 1 being more risky.

There are many things to look at when researching stocks, bonds, mutual funds, index funds…but I have mainly stuck to the basics of index funds and a few stocks thrown in there. This is all simply a blurb of some information I have learned from him, take it with a grain of salt if you will. I have found success from his knowledge, will continue using his practices, and asking his advice on this topic. I wish you the best of luck and hope this helped you start thinking about building up your financial portfolio.

Setting goals helps keep you on track. Try to brainstorm a few financial goals you want to achieve in the next year!

My Practical Goals for the Next Year —>

1. Diversify my investments 
2. Earn at least $500 in dividends by the end of 2025
3. Save and continue to max out my Roth IRA each year (Do it, start one) 
4. Max out the 401k offerings with my company (Also, start one…if you can!)