Suze Orman’s 4 No-Nonsense Investing Rules You Might Not Like
Written by
Karen Doyle
Edited by
Levi Leidy
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Suze Orman, the self-made financial guru, TV host, author and podcaster, is well known for giving blunt, no-nonsense advice about investing. Here are four of her investing rules that you may not like — but they work.
Ignore the Price of a Stock When Buying or Selling
Orman suggests that investors need to dig deeper than the price of a stock to determine if it’s a good investment.
“A good stock is a good stock regardless of price. The price doesn’t determine if it’s good or not. Stop looking at the price of a stock to determine if you’re going to buy it or sell it,” Orman said on her podcast.
You Don’t Have To Sell — Ever
It’s tempting for investors to want to sell a stock that’s appreciated significantly, and to reinvest that money is something else that has potential. Orman cautions against this approach.
“I’ve owned some stocks now for 20 years,” Orman said. “I don’t know if I’m ever going to get out. There’s no reason for me to get out just because it’s gone up in price. Because that stock is still that stock and it has just gotten better and better and better. Stop thinking, ‘When is it time to sell?’ It’s time to sell not because the price of the stock went up. It’s time to sell because the company itself, the people running the company, it’s no longer in favor. It’s been taken off an exchange because nobody cares about it anymore. Well, then you might want to sell. You don’t want to sell stocks that are part of the future.”
Avoid Mistakes by Buying Companies You Believe In
Orman knows that investors sometimes make mistakes by choosing stocks for the wrong reason, and she says that there is really only one good reason to buy: because you believe in the company.
Orman said, “How do you know when you have made a mistake when you have purchased a stock? Here are some signs that will show you if you’ve made a mistake. You bought it on emotion. You bought it because your friend told you so. Or you read a headline. Or you didn’t want to miss out. All of those are wrong reasons. If you cannot explain in one or two sentences what the company does and why you believe in its future, I am telling you, that is a mistake.”
Never Take a 401(k) Hardship Withdrawal
Orman cautions against taking a hardship withdrawal from your 401(k) plan, even if you’re in a dire situation.
“That is to be your cash of last resort,” Orman said on her YouTube channel. “You really don’t understand what a hardship withdrawal is. You think if you go to your corporation and you tell them the dire straits that you’re in, the hardship that you’re experiencing, that they’ll say to you, ‘Oh, no problem, you have money in your 401(k), here it is.’ And you’ll get to take it out without having to pay taxes on it, and without having to pay a penalty. Well, guess what? You could not be more wrong if you tried.”
If you take a withdrawal, you will pay federal and state income tax at your regular rate, plus a 10% penalty if you are under age 59½. So, if you withdraw $10,000 at age 45, and you pay 20% in combined state and federal income tax, you will pay $3,000 of your hardship withdrawal in taxes and penalties.
There are two other reasons not to take a hardship withdrawal, according to Orman. You cannot pay it back, should your fortunes change. And you cannot contribute to your 401(k) plan for the next six months. So, in addition to reducing the amount that’s already in your account, you can’t add to it.
Having taught herself about personal finance and investing, Suze Orman has gotten to the point where millions listen to her advice — whether they like it or not.
More From GOBankingRates
