Why has investing been over complicated for so long?
Hi there, yes you- so you want to know why investing is misunderstood?
You came to the right place.
Investing has been perceived to be something which requires you to have tremendous skill and talent to pull off, or even as something that only the rich can do successfully- it’s all bullshit. The best investing is the most simple investing, simply purchasing what you understand and believe in, Warren Buffett and Charlie Munger have made this clear over and over in their Berkshire annual meetings- they have created billions by: “having a passion for keeping things simple.”
Investing simplified: https://www.investopedia.com/articles/basics/11/3-s-simple-investing.asp
What can you expect when investing?
The expectation on the results you can achieve and the risk that you need to take in order to achieve those results is massively misconceived. You can take small risk by buying something which has a moat around it, an asset which in itself provides a margin of safety within the purchase- this can come in all sorts of forms. A few examples: A value investment, low price relative to the buyers interpretation of what the true value of the asset is. A stand out trait that the asset offers, for example: A bank being a strong investment due to the simple fact that there is always a demand for cash. The rich demand cash to make more money and the poor will usually demand money in the form of debt.
Your expectation should be somewhat proportional to the amount of risk you are willing to take as well as your effort in finding the investment option, if you think buying an asset because a peer or friend recommends it is going to get you high returns- you have not understood investing. Investing is all about your money working for you in order to meet your specific expectations in regards to how much you can get back and when you will get that amount. It is about beating yourself at your own game and not others at theirs.
We have somehow lost ourselves in this process of comparing our investment results to other funds, firms and investment options. This is not the correct approach to be taking in investing and to make it clear once again- you should be investing to meet your own personal needs and to anticipate or plan for your own future. Your investment choices should handpicked or picked by someone who has your best interests at heart as a unique investor.
Why is investing a good way to grow your money?
Investing is simply a way of safe guarding and growing your money long term, to safe guard your money against inflation and poor spending habits for some is essential in generating long term wealth. Too many of us are buying what we think we need instead of what we need and this causes many issues later in life. It should be stated that: if you buy what you do not need, you will be selling what you need to cover your expenses. Investing can be a way of allowing you to have self control in your spending habits.
These investment tips are fantastic for anyone regardless of age: https://www.forbes.com/sites/jrose/2019/01/19/financial-advisors-share-their-best-tips-on-how-to-invest-in-your-20s/#72869191231d
Why should you invest?
You should invest to allow yourself more future opportunity and also as a way to have your money work for you. The amount of people that save money and do not invest it, later go on to spend it on something which is of short term value. Investing is all about generating long term value and increasing prospects for life, you do not have to invest to get rich- as investing is simply a way of allowing your money to do something other than sit in a bank at stupidly low interest rate.
What results can you expect?
If your a millennial you can take more risk, so you could beat the market if you have patience and the right mindset when it comes to investing- 80% of investing is just emotional stability. You need to be able to have the temperamental quality that allows you to hold investments in times of lows. People will end up losing more money anticipating how the markets are changing or will change because of short term drops, more money is lost this way than it would be if you just held on to your investment.
For results, you can expect greater results the longer you can hold your investment- if you value invest. You almost always win, as the true value of the asset will come out at a later date and the assets value will rise with time. If stocks is your game, your investments will grow exponentially and this can lead to disgustingly large returns but it is to be said that: 90% of people do not have the emotional stability to hold onto an asset for that long.
Warren Buffett’s success is something which has proven this, everyone is chasing the hot new thing, why have the hot new thing when you can just make sure what you currently hold is slightly warm for the long term.
Who should invest?
Everyone, cash is only a good idea if you are anticipating for market crashes or saving to invest. Cash in the right hands holds massive power and value as it can be used to buy bargains at specific times, if you are not an expert at this- it is wise to invest your money into assets which will grow for the long term. Cash is typically bad to hold onto, as your cash typically rots with time and assets grow.
Investment ideas:
https://www.forbes.com/sites/jrose/2018/12/27/best-investments-2019/#46dedf3069bc
“Invest you must”- John C. Bogle
Conclusion:
A rough idea of what you can expect if you are yielding average results through investing in the stock market: £2000 in 2016 would have grown to £3400 today, it may seem like a little but it is evident that this growth through passive investing is not by any means small. Most markets will go up in the long run, I know that much and Buffett would agree- predicting long term market trends is fairly simple and has been overcomplicated for too long.
Find out more about investing at:
A wide range of resources allowing you to grow and develop your mindset as an investor.
Thank you for reading and have a fantastic day.
Regards,
Jagdip
