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What I wish I knew about investing One thing about life is that overall we get one shot. At least we think we do.
The good news about investing is that if we learn lessons early enough, we get many many chances to get things right. Clearly the earlier we can get things right the better.
What I wish I knew about investing #1 – There is no perfect
One thing I wish new investors could grasp is that there is no perfect with investing. Just like life. Outside of the Mona Lisa and Mozart, there is probably not much that is perfect.
The Good News
There may not be a perfect, but there are fundamentals. Just like practicing sports or the arts, there are fundamentals that must be understood and practiced first. And over time those fundamentals can be modified to fit your particular style. But without the strong fundamentals, most will flail and fail.
In many ways the whole Money Viking journey is about truly understanding and practicing the fundamentals to lead to success in building a life of True Wealth. After 20 years of investing, I am more convinced than ever that the fundamentals do lead to success in the near term and long term.
What I wish I knew about investing #2 – Time Trumps Action:
I had no idea when I began my investing journey I would invest through war, 9/11, more war, a Dotcom bubble pop, more war, the greatest recession (almost a depression), a 100 year pandemic and of course more war.
Yes, the world turns, and some people do good and others are just damn rotten and screw things up for millions. Will it ever change? I do not know. But I do know that no matter what happens, great strong companies continue to deliver value to customers and people generally want to consume and live their lives. If that changes, then the least of our worries will be the performance of our portfolios.
And more chaos will come, some new war or global issue will hit. They always do. And I will just keep buying assets at the best price and quality I can find.
So the major takeaway is that time in the market beats any type of smart actions or quick moves I could ever have made. I could never really have predicted the crazy world events we have lived through so far.
What I wish I knew about investing #3 – Automate to get out of your own way:
Automating our way to investing and through dollar cost averaging is making millions of people wealthy. See, we are present moment biased because all we really experience is the present. We have a hard time understanding the power of putting a few hundred bucks into an investment now.
When we automate, we take the present moment biased monkey out of the equation. We truly become the sum of our small habits.
If people have a hard time budgeting, I usually tell them to automate into their investments and requirements, then spend the rest with abandon.
What I wish I knew about investing #4 – Favor the broader market over individual stocks
I truly believe that for the majority of people (me included), we should simply own indexes that contain a diversified bunch of quality companies. Individual stocks should be reserved for money that can be tied up with more risk.
Resources for New Investors
For most people investing is scary. This is due to how most people approach it. But I can assure you that not investing in this life becomes even scarier over time as inflation ravages savings accounts.
We all have some form of fear to manage in life. And there is such thing as a healthy dose of fear to keep us out of trouble. But too much fear of investing holds many people back.
Your fear level should be tied to your risk tolerance level. Risk tolerance is understanding how much you can stand to lose in your investment account over the short run without losing your mind or sleep.