Learning How To Invest
If you learn the basics of investing, you can significantly improve your quality of life.
I understand that this sounds like a dry subject, however planning out your hopes for the future is a lot of fun. Get your investment plan in order while you’re young, and you’ll be able to say “Yes” to more cool things in the future.
The question isn’t “Will I become an investor?”
It’s “Given that I will have to put my money somewhere in the future, where should I put it?”
Or even better “How can I use the money I will earn in the future to fuel the things I want in life?”
You can’t afford not to know what a share is, or how dividends work, or the pros and cons of buying a house. Make whatever decisions you want about those things, but at least learn the essentials.
The most valuable investment you can make right now is in your own education.
Teach yourself how it all works, and think about what sort of risk and volatility you’re comfortable with. Don’t let anyone tell you that because they like an investment you should too, especially with huge commitments like property.
A good question to ask would be
“When do I need to get my money out of this investment?”
Shares move up and down, term deposits only go up. Houses generally go up, but you have to spend money maintaining them.
None of those are good or bad in themselves, the decision is about which is most appropriate for you.
This is not going a “Get Rich Quick” solution. If you put a few thousand dollars into shares, the annual returns probably won’t be more than $100-200, minus tax. Don’t do it for the money, do it to build the habit of investing regularly, and investing wisely at that.
Eventually, you’re going to be playing with larger and larger piles of money, which will magnify your wins as well as your losses. Get your act together early on and you’ll create more freedom for yourself.
Remember Dave Chappelle’s insight:
Money doesn’t buy happiness, but it does buy freedom and choices, and freedom and choices bring happiness.
· To get started, I’d suggest reading books like Rich Dad Poor Dad by Robert Kiyosaki, and The Barefoot Investor by Scott Pape. Both are well written, in plain English, cover the basics and are available at the library.
· If you want to learn how the stock market works (at least in Australia), I’d recommend the Starting Out In Shares – The ASX Way, it covers all the essentials, plus a bit on investment strategy.
· I’d then suggest the shareholder letters written by Warren Buffett, one of the greatest investors in history. He’s sensible, calculated and his writing keeps you engaged. They’re available for free at http://www.berkshirehathaway.com/letters/letters.html
· Whenever you hit something you don’t understand, go to www.investopedia.com
When I first started at TDi, during meetings I would keep note of all the terms I didn’t get, and looked them up later. This drastically sped up my learning, and meant that next time I wouldn’t have to bluff my way through the conversation.
· The Reddit community at r/investing is good, with lots of links and resources for anyone getting started who wants to learn more. Go to https://www.reddit.com/r/investing/top/
Here’s the important bit. Once you’ve a few books and articles, actually put your money into something. It doesn’t have to be much, just make a start.
Keep chasing the things interests you. If that’s property or options or Bitcoin or commodities or something bizarre, great. Keep learning, and share what you learn with others.