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Investing Advice from Mellody Hobson

Photo: Starbucks.com

The Motley Fool highlighted investment advice from Mellody Hobson. Hobson is known as the the co-CEO and President of Ariel Investments, where she had worked for almost thirty years. Late last year, Starbucks names Hobson as its board chair making her the first African American woman to hold that position.

The financial difficulties Hobson experienced growing up had an effect on how she views investing. She was the youngest of six and grew up in a loving home but there were some challenging financial issues. What she saw motivated her to learn more and understand how financial systems work. Instead of shying away from money matters as people who face financial hardship can, Hobson went into finance.

The article notes that Hobson is a fierce proponent of having a long-term perspective…” and that her “disciplined, long-term approach to investing is seen in Ariel Investment’s motto “slow and steady wins the race”, which uses a turtle to symbolize the firm’s investment philosophy.”  In 2020 graduation speech, the 1991 Princeton graduate says that if someone from her graduating class had invested $1 a day or $30 a month, that money could have grown to being almost $40,000 by  2020.

While Hobson’s advice to graduates spoke specifically to the advantages of patience in investing over many years, her overall philosophy can be applied in other ways. As The Motley Fool points out, investors pay less in taxes when they hold on to investments longer. In this instance long term can be a period of over one year and not decades: 

“If you invested for the long term (over a year), you’ll unlock lower tax rates  of 0%, 15%, or 20% depending on your income and filing status. By holding your investments over the long-term, you have the potential to make more money and pay less in taxes.”