Hobson’s choice: Pay debt

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Mellody Hobson is the chairwoman of investment firm Ariel Investments and a member of the board of governors of Investment Company Institute, which is the mutual-fund industry’s trade association.

Given her positions, you might expect Hobson, who is a regular financial contributor on “Good Morning America,” to always make mutual funds the priority. Refreshingly, that isn’t so: Hobson says if you have to choose between contributing to your mutual fund or paying off credit-card debt, you should pay off the credit-card bills first. That’s because you’re likely paying more in interest than you would make from a mutual-fund investment. “That kind of debt is a great example of the power of compound interest working against you,” she says.

Hobson also advises against letting market gyrations keep you from investing. As a result of that strategy, Hobson says she’s bumped up her investments in Ariel funds and holds less cash. Her portfolio is 100 percent in stocks.

J. Waggoner