Suze Orman — financial advisor, author and host of the “Women and Money” podcast — has spent decades helping people make smarter financial decisions. On her Oct. 20 episode titled “Knowing What To Invest In, When You Don’t Know What To Invest In,” she shared where to put money if you’re unsure.
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From index funds to dividend stocks, here’s what Orman recommends when you have the money to invest, but aren’t quite certain how to put it to best use.
Orman emphasized the importance of investing in index funds. These funds mimic the performance of a specific market index, offering diversification. She stressed that what truly matters is not chasing after investments with impressive returns, but consistency in your investment behavior.
It’s about making regular monthly, quarterly or semi-annual investments. This is why Orman is a big fan of employer-sponsored retirement plans like 401(k)s, 403(b)s, or thrift savings plan (TSP), which automate everything, ensuring you stay consistent.
Orman also insisted on dollar cost averaging (DCA) when investing in the stock market. DCA is regularly investing a fixed sum of money, regardless of market conditions. For example, if you have $1,200 to invest, you might break it into four $300 investments spread over the year. This strategy helps mitigate the risk of market volatility and eliminates the pressure of trying to time the market.
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Apart from index funds, Orman prefers ETFs over mutual funds. She finds ETFs more advantageous because they trade like stocks, which you can buy and sell at any point during the trading day. Mutual funds, however, tend to settle at the end of the trading day.
When choosing between ETFs, Orman likes VOO over SPY, though she believes either choice is fine. Both track the S&P 500 and offer solid returns, but she thinks VOO has a slight edge.
While Orman acknowledged some investors might prefer individual stocks, she stressed the need for professional guidance in this area. Without a deep understanding of the company and its market, it’s easy to make costly mistakes. Her advice for anyone lacking this expertise is to stick to index funds or ETFs, which offer safer, predictable returns.
What if you’re not a fan of index funds or ETFs? Orman offered an alternative: dividend stocks, mentioning Whirlpool (WHR) as a potential option.
At the time of her recommendation, Whirlpool was trading at approximately $107 per share and offered a dividend yield of 6.53%. Orman gave two reasons why she sees Whirlpool as an investment worthy of consideration:
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Recent hurricanes, floods and tornadoes destroyed thousands of homes and appliances. Orman believes many homeowners will likely replace their damaged appliances with Whirlpool products, thanks to its brand recognition.
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A high dividend yield makes Whirlpool attractive for dollar cost averaging, particularly for investors seeking consistent income.
While Orman is optimistic about Whirlpool, she also insisted you do your own research to ensure it aligns with your financial goals.
Knowing when to sell an investment can be tricky, but Orman simplifies this with one crucial question: If you had, for example, $1000 in cash and didn’t own Facebook (META), would you buy that META today?
If your answer is no, Orman advises selling. If it’s yes, hold on. And if you’re unsure, consider selling half. This approach prevents emotional decisions and helps you stay in line with your financial goals.
Whether you’re new to investing or looking to refine your strategy, Orman advises investing in index funds or ETFs and staying consistent, whether the market is going up or down.
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This article originally appeared on GOBankingRates.com: Suze Orman: What To Invest in if You Don’t Know Where To Put Your Money
