Joe Duarte has been an active trader and widely recognized stock market analyst since 1987. He is the author of Trading Options for Dummies, and recently updated the second edition of The Everything Guide to Investing in Your 20s & 30s.

Last week, I sat down with Joe to get his thoughts on the steps young investors can take to start building a solid financial foundation. Here’s part two of our interview.

Values

Jim: As a group, many people in their 20s and 30s feel strongly about the societal and environmental impacts of capitalism. For that reason, is “socially conscious” investing something they should consider?

Joe: Investing with your conscience is a viable approach. I find that it’s best to keep it simple. For example, if you know that a company such as Starbucks (NSDQ: SBUX) uses green technology to power its stores, tries to use the cleanest coffee beans it can find, and does things in its stores that you would do at home, that type of investment may make sense.

The downside is that some “green companies” are greener in their marketing than their practices, so in-depth research makes sense before investing.

Real Estate

Jim: For my generation, real estate has turned out to be a great investment. Should investors in their 20s and 30s expect a similar result over their lifetimes?

Joe: Real estate is cyclical and now, more than ever depends on the trend for interest rates from the Federal Reserve. It can, however, be very useful for any investor at any time who is willing to figure out which approach works best for him.

Specifically, you can be a landlord, a flipper, or you can invest in housing and related stocks, mutual funds, or real estate investment trusts. It also helps to understand local markets, the legal issues involved, and the ins and outs of taxes.

Risk Management

Jim: Can younger investors afford to take more risks than older investors? If so, are there certain risks they should avoid regardless of age?

Joe: Risk is personal and understanding your own risk profile — i.e., the willingness to take risks — is an important early step in the investment journey. For example, if you don’t go out in the rain because you are afraid of falling, maybe aggressive stocks aren’t for you, no matter what your age.

At the same time, young investors have more time to recover from mistakes, which means that they can take a few more chances than investors who will need their nest egg for retirement in a few months.

Professional Advice

Jim: At what point in life should young investors consider hiring a financial advisor to help them manage their money, or are they better off doing it themselves?

Joe: Not everyone needs a financial advisor. There are plenty of books and resources, such as Investing Daily, to help you get started. However, if you need an advisor, you should get one as early as possible in order to work out plans and strategies.

Chapter 15 of my book for young investors provides plenty of details as to the types of investment advisors and how each may fit a particular set of needs. I recommend a good read of this chapter before making that type of decision.

Taxation

Jim: Should young investors take tax consequences into consideration when making investment decisions? If so, should they max out their pre-tax contributions to 401(k) and/or IRA accounts?

Joe: I am a great believer in IRAs and 401(k) plans because they allow investors to gain as much as possible in the present and put off paying the taxes until they actually withdraw the money from the plan. Indeed, IRAs and 401(k) plans are great vehicles for long term savings and work best when the contributions are maximized.

Saving for College

Jim: Is investing in a prepaid tuition or 529 plan a good idea for young investors just starting families? If so, do you favor one type of plan over the other?

Joe: Planning for education is important, but may not be the best first step if finances are limited.

Certainly, with tuition costs continuing to rise, the earlier you start to plan for a child’s education, the better off you’ll be. There are different plans and each one has advantages and disadvantages.

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