This Is Suze Orman’s Blueprint for Investing
Written by
Angela Mae
Edited by
Molly Sullivan
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Suze Orman, a financial advisor and personal finance expert, has provided financial advice to millions of people through her website and podcast. One of her areas of expertise is in helping people obtain financial freedom — largely through investing.
She doesn’t promote just any kind of investing, however. In particular, Orman emphasizes having a portfolio of stocks — as they’re a type of long-term investment option that can grow over time — as well as assets that mitigate risk.
If you’re thinking of investing and want to know what Suze Orman suggests, here’s the breakdown.
Prioritize Stocks
When it comes to investing, one of Orman’s main focuses is stocks. This includes investing in a diverse group of stocks, including small- and large-cap stocks, to build wealth.
To support this idea, here’s what she wrote in one blog post:
“Even after a rough 2018, U.S. stocks still have a 10-year annualized gain of 13%. That’s well above the long-term average of 10%. If you are investing for the long-term, it’s how your money grows over time that matters most.”
Buy and Hold Onto Those Stocks
No investment is without risk. That’s just as true of having an investment portfolio made up of stocks as it is of anything else. But you may need to ride out that risk — or the declines in the stock market — to see true long-term growth.
In the previous article, Orman specifically recommended investing for a long period of time — even if the individual stocks lose value.
“If you are investing for a goal that is 10, 20, or 30 years out, there is actually upside to the recent decline in stock values,” she wrote. “Lower share prices means your investment dollars buy more shares. That’s fantastic. Over time those shares will rebound. The more shares you have, the more valuable your account will be.”
The long and short of it is this: Don’t sell everything the moment you start seeing a decline in the market. Hold out and buy more so that you’ll gain more once the market bounces back.
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Diversify and Expand Your Portfolio
Many financial gurus, including Orman, will suggest diversifying your portfolio, and for good reason. It can mitigate risk and increase your odds of seeing consistent returns — even across different asset classes.
Here’s what Orman said in one podcast episode about technology stocks and earning dividends:
“There’s approximately $6 trillion in those kinds of investments. And I have absolutely no doubt that when interest rates really do start to come down and the people in those investments are no longer happy with the interest rate that they are getting, that money will flow where it will flow into growth stocks that pay a dividend yield.
“Listen closely, everybody. It will not just flow into technology stocks, it will flow into growth stocks, stocks that will go up but also pay a dividend to replace the income that they were getting from their treasury bills and money market accounts.”
Mitigate Risk With Lower-Risk Assets
Taking this one step further, Orman also emphasizes allocating your assets across multiple categories, including those that are historically less risky like bonds. After all, your investing journey isn’t a short-term game — you’re in it for the long haul, so you should make strategic decisions that allow you to manage your risk levels and build wealth over time.
As you get older and your financial situation, risk tolerance and investment goals change, it’s also important to reassess your portfolio and make adjustments. When you start to approach retirement, Orman also suggested switching to a more conservative portfolio by including more bonds and fixed-income securities as opposed to stocks.
Using Dollar Cost Averaging
Dollar cost averaging is an investment strategy where you invest a set amount of money on a regular basis, no matter the share price.
Say, for example, you plan to invest $1,200 in a given year in a specific asset class. You could invest all of that money at once. Or you could use dollar cost averaging to invest $100 a month every month for a year.
The idea here is that you’ll still end up investing the same amount of money, but you might be able to avoid some risks by splitting your investments over a longer period of time.
Suze Orman also recommended this strategy, especially if you’re investing in a particularly volatile time.
“So [the investment] gave you diversification, it gave you a return, it will continue to go up, continue to go down, is paying you a nice dividend,” she said in another podcast episode. “And so, that’s why I like dollar cost averaging. Because in markets that are crazy, maybe you don’t make as much money as if you’ve just taken all of your money and invested it, but you’re not gonna lose it either.”
Some Final Notes for Establishing a Portfolio
Orman has suggested quite a few other ways to build your investment portfolio, mitigate risk and work toward financial freedom. Here are just a few:
- Use compound interest as soon as possible. By investing in stocks early, as well as contributing regularly, you can take advantage of the power of time — and compounding interest — to grow your wealth.
- Evaluate different types of stocks. Not all stocks are created equal. Orman suggested purchasing low-cost index funds and exchange-traded funds (ETFs). She also advised prioritizing dividend-paying stocks.
- Use 401(k) plans and IRAs. These accounts are tax-advantaged, which means they offer you tax benefits, such as lowering your earned income the year you make your contributions. They can also grow over time.
- Don’t forget to rebalance. Your goals, financial situation and risk tolerance can all change over time, so your asset allocation should, too. Rebalance your portfolio every so often to make sure it’s on track with what you need.
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