Jumping into investing if you don’t know the first thing about it is equal in risk to jumping into a pool if you don’t know how to swim—but learning to invest isn’t hard and, like most lessons, it’s better to learn from others’ mistakes.
When I was in high school, I’d hear TV news reporters talk about how “stocks rose today amid speculation that …” or “the Dow plummeted 243 points today.”
None of this mumbo-jumbo meant anything to me, and I doubted that it ever would. I assumed that this TV segment was geared towards a wealthier audience: the seemingly mythological “rich people” who invest, not ordinary people like myself.
But as I entered my late teens and early 20s, I began to realize that being rich isn’t a prerequisite to investing. On the contrary, investing can serve as the cause, rather than the effect, of building wealth.
So I decided to learn about investing. Well, kind of.
First I jumped into investing without learning anything. “Learning can come later, right?” I reasoned. I heard a “water cooler tip” and dove into it headfirst, with zero research or due diligence.
That’s absolutely inadvisable. Fortunately, for me, it turned out okay.
The water cooler tip was to invest in mutual funds. I didn’t know how to choose a fund, so I more or less picked one at random, opened an account, and started my investing career with a contribution of roughly $2,000.
After ignoring this account for several years, I became interested in it again after I graduated from college and started my first full-time job. Now that I had a little discretionary money, I began treating the mutual fund like a high-yield savings account. I didn’t have any investing strategy or plan. I’d simply throw cash into the fund and watch it grow. At the time, it felt like the market could only rise.
Then came the 2008 market crash. My portfolio value got sliced nearly in half. Suddenly, this mumbo-jumbo about “risk” became real … and I realized I’d better learn about investing before I made any more moves.
First, I perused several dozen copies of Money magazine—both recent editions and older editions. I’d always loved this magazine, even as a kid (nerd alert!), but in the past I’d glossed over the investing sections. This time, I tuned into those sections closely.
Then I moved onto books. I read The Millionaire Next Door and The Millionaire Mind, both by Thomas Stanley, and Rich Dad Poor Dad by Robert Kiyosaki. These laid a big-picture framework.
Then I really dove into books:
- The Intelligent Investor, by Benjamin Graham and Jason Zweig
- Common Stocks and Uncommon Profits, by Philip A. Fisher and Kenneth L. Fisher
- Conservative Investors Sleep Well, also by Philip A. Fisher
I chose these books because acclaimed modern investor Warren Buffet remarked that his investment philosophy was 85 percent Fisher and 15 percent Graham.
After finishing these classic books, I moved onto modern tomes:
- How Rich People Think by Steve Siebold
- The Millionaire Teacher by Andrew Hallam
- The 10 Commandments of Money by Liz Weston
And many more. I also continued reading Money, Forbes, and Kiplinger magazines.
By the end of that reading bonanza, I’d learned about the relationship between risk and reward, volatility, expense ratios, asset allocation, strategies around choosing and holding investments, and dozens of other topics I wish I’d known of before I set up my first account.
I started a finance blog, and as a result, began networking with other people across the nation who shared my interest in investing. Notably, several CERTIFIED FINANCIAL PLANNER™ professionals, whom I met through the blog and through conferences, became close friends. These conversations with professional advisors became invaluable, as they’d shed light on topics in a manner that was far more personal and unique than anything I could find in a book.
I’d meet with my CFP® professional friends at least once every couple of months, and I would ask them questions about something I read that might not have made sense, or that I was still trying to work through. In return, I’d answer their questions about international travel and real estate and other topics. In a sense, we became an informal group of masterminds.
Finally, I started using online calculators to get a sense of how much money I might need in retirement, how much a hypothetical investment might grow over a given timespan, and how much I could save by paying off my mortgage early vs. investing instead. I played with multiple calculators across a variety of different websites, and I don’t take any of their outcomes as literal truth (since each one is based on assumptions that may or may not pan out). I use it, instead, to educate myself about different possible scenarios and likely outcomes. It gives me some hands-on, interactive learning.
These days, I definitely don’t believe that investing exists only in the otherworldly realm of “rich people.” I understand that an average Jane, like myself, can become an investor—even without a fancy finance degree or buckets of money. We just need a three-legged stool: reading, conversations with trusted advisors, and hands-on experience.
Paula Pant quit her 9-to-5 job,
traveled to 33 countries,
launched a business she runs from her laptop,
and uses the profits to invest in real estate.