I just finished reading the 2001 edition (cutting-edge, aren’t I?) of David & Tom Gardner’s The Motley Fool: You Have More Than You Think. I read it in three days, which is unusual for me - while I don’t typically gravitate toward page-turners, I couldn’t put this book down. I’ve had this book for years, but only now read it (though I did start my personal journey of becoming financially literate at Fool.com a few months back).

The gist of the book is that you should be investing in the stock market. More specifically, you should:

• Buy stock in a few good companies, and plan to hold your stock for decades, not days
• Avoid paying fees to brokers whenever possible (I use E*Trade for the lowest fees). Realize that stockbrokers make money when you buy and sell, not when your assets grow; resist the temptation to constantly buy and sell.
• Choose index funds over mutual funds, and you’ll nearly always come out ahead in the long term

This advice comes in the context of a few obvious bits of investment advice, e.g. paying off credit card debt before investing much in the stock market, and leaving your money untouched so the magic of compound interest can grow your fortune over time. Everyone, the Gardners assert, should be investing in the stock market (even if it’s only a dollar a day), because over the past century it’s offered an average 11% annual return (doubling your money every seven years).

It’s a readable if dated book, with glowing references to AOL and other 1990s icons, but it left me looking for more basic financial advice, so I’m next turning to Dave Ramsey’s Financial Peace Revisited.

A few months back, when graduation caps were in the air, Damon Darlin of the New York Times put together a great column of common-sense financial advice for grads.

The gist of most of Darlin’s advice is simple: choose carefully what you spend your money on, because little things add up, and it’s better to put money into savings for things you care about than to fritter it away on things like coffee and eating out - expenses we generally fail to fully calculate for ourselves.

I graduated from college about five and a half years ago, so I can attest to the wisdom of his advice - especially the points I haven’t followed, such as banking raises and not getting used to a rising standard of living.

Advice to All You Graduates: Let’s Start With That Daily Latte . . . - Damon Darlin, NY Times

Prosper.com, the direct-loan marketplace, has created a new feature to help investors (like me) develop a balanced portfolio that reflects their tolerance for risk and desired level of returns.

Prosper Porfolio Plans allow you to devote a certain amount of money to any or all of 4 categories of risk, and you can also specify how much to invest in each individual loan.

The interest rate for high-risk loans is much higher, but the corresponding higher rate of delinquency results in only modestly higher average returns. Prosper discloses this information clearly elsewhere on their site, so you can calculate your total ROI fairly easily.

I only add a modest amount of money to my Prosper account each month, so I won’t be using this feature any time soon, since I balance my portfolio manually by bidding on a higher-risk loan one month, then a lower-risk loan the next month.

How do you invest?

Steve says:

I’d love for you to come and see an entirely new approach to helping people through business. Our blog helps to financially support and fund a small business in a developing country, each and every day. In return for this all we ask is for people, just like you, to donate a business idea that we post. Those business ideas are made available for free on the site to help spark the imagination of budding entrepreneurs. By donating an idea you can help to change a life.

Steve is an experienced social enterprise entrepreneur and chairman of the Myvesta Foundation. For every idea that’s posted on the site, the foundation makes a donation to Kiva, the nonprofit organization that helps people loan money to entrepreneurs in the developing world (read the press here, or see former President Bill Clinton talk about Kiva here).

In exchange for donating an idea, you get a link to your site, which could be a big deal if the Business Idea of the Day site takes off.

This is a great concept on multiple levels:

• People who visit the site get free business ideas
• People who borrow money through Kiva can expand their businesses and lift themselves out of poverty
• People who post ideas get free Google juice when their idea is posted

Well done, Steve.

I started my financial learning journey at Fool.com, home of The Motley Fool. One of the first big insights I came across was that Roth IRAs are one of the best ways to save for retirement.

What’s a Roth IRA, and how does it work?

1. You save up to $4,000 a year in investments of your choosing
2. The money you save is not tax-deductible, and must be earned income
3. You can start withdrawing the money at age 59.5, and it’s completely tax free

I’m a few months shy of being 27. If I were to start saving the maximum now ($333 a month or so) until I’m 59.5, and earned 10% interest on my money, I’d have a million bucks by age 59.5 - all tax free.