I am a big fan of the financial independence, personal finance movement and all of the great people trying to help others not be “normal,” as Dave Ramsey would say. It is great to hear about others’ experiences, both to learn new ways to do things and also see that others aren’t perfect either. People who reach financial independence don’t do everything perfectly. They buy a latte once in a while. They sometimes buy something on vacation they later regret buying. They maybe miss making a budget some months (very guilty, but I’m hoping to do better in May). It is good to see that you don’t need to be perfect to make your life better and more secure in ten years than it is today.
One area that concerns me, however, is when people start to get into investing advice. I don’t mind when people say what they are doing with the caveat that they are learning. Just as with personal finance, hearing stories of what people are doing to invest and their results is good for all. In particular, if someone does a boneheaded move and tells people about it and the money they lost, that is helpful. Maybe others won’t do the same. (Although I’ve found you need to lose money sometimes before you’ll accept a lesson. I call this “paying tuition to the markets.”)
What I don’t like is for someone who has little or no investing experience trying to tell others how they should invest. Investing is a craft which takes years of experience to really master. You need to have gone through up markets and down, made and lost money, and read a lot before you can really know where the pitfalls are and learn what works and what doesn’t. This isn’t to say that you shouldn’t start to invest until you have a huge amount of experience, because you can’t get experience without actually investing. This is to say that you shouldn’t be recommending that people put all of their money into XYZ stock when you’ve just opened a brokerage account yourself and have been investing for a year or two.
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Note that just because a person is “in the industry” does not mean that they know how to invest either. There are a lot of people in the financial planning business who maybe have some sort of certification, meaning that they’ve passed a test on things like tax planning and life insurance with perhaps a few questions about what a stock and a bond are thrown in, but without any real experience investing. They’ve never felt what it was like when your portfolio has declined by 40% in a month and it seems like the whole world is crashing down. They also are often on commission to sell the high-priced mutual funds that their firm pushes so they may not have your best interests at heart.
Someone with a finance degree, or a business degree, is also not necessarily the person you want to be taking advice from. These degrees might give them some good insight into how the financial system runs or how to run the payroll at a business, but they do not make them good investors. In fact, there really are no college degrees that make people good investors, just as there are none that make people good salesmen of woodworkers. It all comes from experience.
The manual on how to make money by investing. Read The SmallIvy Book of Investing.
Having said that there is a lot of bad advice out there, obviously, there is a need for good advice. If you want to reach financial independence within your working lifetime, investing is almost a must. You should be investing a portion of your paycheck and building up a portfolio that will provide income to you. This is the way that you become financially independent.
To fill that void, you’ll see a change in the articles and organization of The Small Investor going forward. We want to become the go-to site for people who want to learn how to invest, both complete novices and those who have been investing for a while and want to do things better. We’ll also keep a personal finance flair as well, since managing your income correctly is the way that you free up cash to invest.
It will take a little while to rejigger things, but you’ll soon see a shift in the way The Small Investor is laid out and the kinds of articles we publish. Most articles will be placed within two focuses – investing and personal finances. With investing in particular, we’ll have very basic articles designed for those who know nothing about investing organized in such a way that you can go from square 1 to being knowledgeable in what you’re doing if you keep reading. We’ll also seek out good articles from others and link to those so that readers can gain from some of the great stuff that is out there. Finally, we’ll have a reading list that you should take advantage of if you want to really get good at investing.
So, please check back often, or better yet, subscribe so that you’ll get notified as content is added. Also, please let me know your questions about investing and comment on what is helpful and what is not. Let’s build a generation of investors. Society will be better when more people are standing on firm financial footing.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.