Lesson 7: Make Sense of Investment Tools | Paula Pant

Some people balk at the idea of starting a 401(k), assuming it has to be invested in stocks. Others see an HSA and think it must be designed for bonds. Paula Pant, host of the Afford Anything podcast, says they’re mistaking the vessel for the contents. After all, would you skip your morning coffee if you didn’t have a mug but had plenty of pint glasses? Or refuse champagne on New Year’s Eve if it was served in a shot glass instead of a flute? In this video lesson, Pant elaborates on how to apply this drinking analogy when considering different types of investment accounts and assets. Differentiate between account types and asset classes It’s important to distinguish the different types of investment accounts from what goes into those accounts. Think of it in terms of a drinking analogy: There are different kinds of vessels that you can drink liquids from (e.g., pint glasses, wine glasses, champagne flutes, etc). It’s common for certain liquids to go into certain vessels (e.g., coffee goes into a coffee mug), but it doesn’t necessarily have to be that way. You could pour wine into a coffee mug and coffee into a shot glass. Similarly, people often conflate savings and investment accounts with what goes into them. For example, some people assume opening a retirement account means they need to invest in stocks. Retirement accounts typically include stock investments, but they don’t have to. As you determine where to direct your savings, decide which types of vessels, or accounts, you want to use (e.g., 401k, taxable brokerage account, HSA, etc.). Then decide which types of assets should go inside those vessels (e.g., stocks and/or bonds). Master one tool at a time Returning to the drinking analogy: If you wanted to learn about glassware, you might start with wine glasses. Then you might move on to tea cups or beer glasses. This would give you some parameters and allow you to tackle each grouping in bite-sized chunks. Take the same approach to learning about different types of financial accounts. Start with retirement accounts. Your HR department can guide you through what your workplace offers. Once you’ve mastered retirement accounts, look into non-retirement investment accounts. ---------------------------------------------------------------------------------- Go Deeper with Big Think: ►Become a Big Think Youtube Member Get exclusive classes and early, ad-free access to new releases without leaving Youtube. https://www.youtube.com/@bigthink/membership/ ►Become a Big Think Web Member Get the entire Big Think Class library, premium print issues, live events, and more. https://bigthink.com/membership/ ►Subscribe to Big Think on Substack Get all of your favorite Big Think content delivered to your inbox. https://bigthinkmedia.substack.com/subscribe/ ---------------------------------------------------------------------------------- About Paula Pant: Paula Pant is the host of the Afford Anything podcast, an award-winning show with more than 24 million downloads. It was named by the New York Times as one of “7 Podcasts Your Wallet Will Love.” She is also the founder of Afford Anything, a personal finance brand with more than 75,000 newsletter subscribers. She is a Knight-Bagehot Business and Economics Journalism Fellow at Columbia University. Pant is frequently featured in financial media including Money Magazine, the Washington Post, Oprah.com, CNBC, Fortune, Marie Claire, Marketplace Money, Men’s Health, Real Simple, Outside Magazine, Cosmopolitan, the New York Times, and more. She’s spoken at the “Talks at Google” series and guest lectured at Georgetown University. She lives in New York City.