Just because you hear them all the time, doesn't mean they are true for you.
When you hear advice over and over again, it doesn't mean it is right. It doesn't mean it is wrong, either. Just don't take the platitudes as fact. Rethink and think for yourself.
1. "Invest in a 401k"
I say think about ditching your 401k.
The biggest thing to remember about trusting your employer with your investments is: that you are trusting your employer with your investments.
If you want the best returns, you are most likely in a stock plan -- but that also means that you're exposed to market risk, meaning that when stocks crash, so does your money.
And whatever wealth you are accumulating in a 401k (if any) can be susceptible to inflation risk -- because if you are taking macro factors into consideration, you could be wiped out by inflation.
One of the most alluring parts of investing in a 401k is having your employer match your contributions. But guess what? Many employers don't. Many 401ks also have ridiculously high fees and commissions that are simply not worth the risk of the unknown.
As the old adage goes, better to take "money in my pocket" over "promises that can't be kept" any day.
2. "Diversify your portfolio!"
You hear asset allocation and diversification all the time.
Lots of financial experts say they work their magic over time because you are forced to buy low and sell high. The idea is that, by mixing things up in your portfolio, you're less likely to experience major drops, because when some sectors experience tough times, others may be thriving.
You may be more isolated from big losses by diversifying, but you're also isolated from big gains -- and if all of the eggs in your basket are duds, you're never going to get ahead, no matter how many different eggs you might have.
You can also hit max overload -- studies have shown that, while some diversification reduces market risk, the market risk isn't reduced by a significant amount once you hit having around 20 stocks or more. So don't spread yourself too thin. And, please, for the love of God, stop stressing about diversification. It's not magically going to make you a millionaire.
3. "Buy a home!"
Rent a home.
It used to be that putting a down payment on a house or apartment was the surefire way to build your net worth. But after the roller coaster ride that housing has been on in recent years, it's time to take a closer look at renting.
Buying a house comes with tons of additional costs -- transaction fees for the broker, maintenance fees, renovations -- while many of those costs are included when you rent an apartment.
Renting allows you greater flexibility to take any opportunities that might come your way, and you typically have more leverage in negotiating rent than with a full-on mortgage.
Also, remember that down payment -- typically about 20% of the mortgage. You don't get that money back like you do a security deposit.
And while buying a home adds to your assets, remember that it's illiquid -- if you fall on hard times and need cash, it's not easy to quickly sell a home -- especially in this market -- without losing substantial value on your investment.
No, don't stick your money under a mattress! Invest in yourself. Always wanted to be a French Professor? Take a French class ... investing in yourself could eventually pay the biggest dividends.