Do You Have What it Takes to Invest?
Investing is Better When You Have Aptitude
There are many things in life you would never do without trying before you know how. Walking, throwing a Frisbee, driving a car, and when is the best time to invest. You can’t really know how until you have done it at least once.
Investing is the same. But you can tweak your aptitude before you take the risk.
In over 30 years of helping people invest in a wide variety of investment types, I found the number one problem wasn’t lack of knowledge, but instead many lacked the ability to invest, mentally. Let me stop the argument here, since some will say aptitude is a natural feature, not a learned feature. I believe everyone needs to learn that they have the investment aptitude already. It just hasn’t been exercised properly yet.
History
Wrong learning in the early years is a barrier to investment aptitude. Many people who were raised by Great Depression age parents or grandparents, have usually been taught to have a strong sense of danger, sometimes despair, at the thought of investing. The feature of the times was a general lack of currency available to trade hands, so they bartered instead. They would like to hide cash in their mattresses, where it can lose buying power without a printed statement to prove it. Their children’s early learning has overcome a natural ability to invest, and their minds will not allow it, because of fear. Today we have an abundance of cash.
Market Losses
Often, another problem with aptitude, is recent experience of loss in the markets followed by failure to overcome those “thoughts” of loss. I have known many people who would have made a lot of money, if they would just have stayed with it long enough. Those who left the markets in the early 1970’s because of oil, crash, inflation, high interest rates, and never returned, missed out on a huge lift following.
The answer here is simple enough. Take what you have learned and do it better the next time.
Knowledge vs Practice
Sometimes it is surprising how often people will come up with an excuse not to do something by saying, “I don’t know enough and can’t until I fully understand”. Yes, for some that may be valid, and they will never overcome this frozen state. If you can understand this is a problem, deal with it, and move on, the rewards can be well worth the thaw. Control yourself.
Cost of Business
Another frozen state is wasting time considering the small fees associated with the cost of investing. Can you buy a house without paying points? Only if you avoid the bank, realtor, appraiser, taxes, and title company. Yet, most think nothing of it. Throw in 1% on a stock or mutual fund, usually likely to outperform real estate, and boom, people suddenly freeze over the fee. Why? There is no reason. Yes, if it goes down, you paid too much, but the same is true for your property, yet you are willing to wait 30 years to consider that. Let’s move along.
Many Reasons, Only One Fix
In the end, investing outperforms ‘not investing’. Not every time, just like not all battles in a war are won. But over time, with practice, patience, buildup of knowledge and experience, nearly every investor does better than those who choose not to. If you stopped investing, you are not an investor.
Does this mean you should grab some money, get it into an investment account or bank loan so you can buy the next object of hope? Nope. But you should start preparing to do so. Find a very experienced investment advisor who isn’t limited to one market, who has experience in multiple markets (like stocks, bonds, options, futures, small business, real estate) and investing their own money, successfully. You need someone like that to help you with advice and risk management. Yes, you need to learn about risk management. It’s just the same thing you use when you follow road signs, use your blinkers, check your oil, and don’t drive with your cellphone going.