Buying the shoemaker instead of the shoes « Well-Heeled, with a mission

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Buying the shoemaker instead of the shoes

February 21, 2008 by wellheeled

A reader emailed moi for advice on how to get started investing in a Roth IRA. I was pretty excited that she thought of me (disclaimer: I am NOT a financial adviser). I don’t particularly talk about my investments on this blog (except to say that I DO invest) because investing is different for everyone, based on risk tolerance, time horizon, goals, etc.

But based on my personal experience, what I will say about investing is this:

-Be informed, but don’t fall into the trap of analysis paralysis.
-Risk & return… if something sounds too good to be true, it usually is.
-Don’t be afraid to ask questions.
-Understand after-tax, after-expense returns.

If you have an interest in learning about how to construct a portfolio and investment theories, some of the books I’d recommend are: All About Asset Allocation by Rick Ferri, The Four Pillars of Investing by William Berstein, and The Coffeehouse Investor by Bill Schultheis.

If you just want to get started, I think Suze Orman’s Money Book for the Young, Broke and Fabulous is a GREAT beginner’s guide. I don’t always agree with Suze, and really didn’t care for her Women & Money book, but YBF is awesome. Another, even shorter guide is On My Own Two Feet, a personal finance book geared towards young woman. The book is a good resource and easy to read.

As to where to get the money to invest… I can’t invest (lend capital to others) if I don’t save (have excess capital to lend). This is a little mind trick I play… whenever I put money into my funds, I imagine I am buying a little piece of the shoemaker instead of the shoes, the automaker instead of the car, the restaurant company instead of a meal.

In 20 years, I would’ve long worn out the shoes, forgotten the meal, or ran down the car. But the shoe company, the automaker and the restaurant will work every day to generate a return to its shareholders (me!), and my pieces of those companies will grow in value.

Posted in Books, Retirement | 5 Comments

5 Responses to “Buying the shoemaker instead of the shoes”

on February 22, 2008 at 8:06 am1 Little Miss Moneybags

Very interesting way to think about it!

I have a 401k but haven’t yet started contributing to a Roth IRA.

I have a love/hate relationship with Suze Orman (I’ve found some of her stuff SO BORING) but I just added Young, Fabulous & Broke to my library request–I’m finding that a lot of the personal finance books out there don’t quite speak to my audience: someone who’s sort of just getting started but doesn’t need to be told how to balance a checkbook.
on February 22, 2008 at 11:51 am2 Single Ma

I love your analogy! I’ve never considered buying stock in shoe store or shoe designer but you just planted a seed.
on February 22, 2008 at 4:51 pm3 Stephanie

I agree, that’s a really cool way to think about it. This made me realize I don’t really know what I’ve invested in for my Roth and 401(k)…that’s kind of scary! Mostly I just invested based on the type of fund it was (growth, value, etc.) rather than what was actually in it. I guess that’s part of that whole movement for socially responsible investing and everything.

Hmm…I guess I should go take a closer look at the funds I’m invested in!
on February 23, 2008 at 5:23 pm4 dogatemyfinances

But the shoes are SO MUCH BETTER LOOKING than the shoemaker. This is hard. Shoes are my weakness. And I just freecycled about a dozen pair…
on March 26, 2008 at 7:02 pm5 Dividends are a girl’s best friend « Well-Heeled, with a mission

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