SEC Chair Jay Clayton’s top investing tips: Compounding, diversification and take free money

Trader Talk

SEC Chief Jay Clayton, who is in charge of protecting American investors, has strong thoughts on what Americans need to do to save for an adequate retirement.

Clayton will appear on The Exchange with Kelly Evans and myself Friday at 1 p.m. ET to talk about the SEC’s job to protect American investors, maintain fair, orderly and efficient markets, and what he is doing to help companies going public, particularly in the now red-hot IPO market.

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But Clayton has also taken a far greater interest than his predecessors in prodding America to save more. Why the interest? Clayton sees what all of us see: a potential looming investment crisis.

He’s just released a series of videos, “Notes from the Chairman” where he shares his personal notes for investing.

His first commandment is to get your financial house in order. Understand “what you have, what you owe, and what you spend,” Clayton said. “If you have high interest rate credit, the best investment is getting rid of that.”

Once that happens, it’s time to start investing. He keeps it simple: compounding, diversification, and taking the free money.

Clayton defines compounding as “making money tomorrow on money you make investing today.” Money grows exponentially, faster than in a straight line: “Starting investing for retirement 30 years before your retirement date is four times as good as investing 15 years before your retirement date.”

Don’t put all your eggs in one basket. “By diversifying, you reduce risk, and keep the same return, in fact in some cases you increase returns,” he said.

Finally, take the free money. “This is magic…if your employer 401(k) or other retirement plan offers matching, take advantage of it. I”ve seen a lot of investments. I know of no investment that is better than free money,” Clayton said.

Clayton’s Tips for Investing can be viewed here.

The SEC also maintains an active website,, that serves as a primer on how the stock market works, the many types of investments (stocks, bonds, ETFs, annuities, etc) and how they work, how to create a financial plan, and how to check the background of an investment professional.

And, in a red-hot IPO environment, the SEC continues to maintain the Edgar website that has become the main tool for researching public companies before they go public.

WATCH: Jay Clayton on CNBC’s The Exchange at 1 p.m. ET today.

For another perspective on how to save for retirement, check out CNBC’s Financial wellness and education initiative,
Invest in You: Ready. Set. Grow.
, which is part of our partnership with Acorns.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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