Lessons Learned as an Investor
At a very young age my grandpa put a lot of effort and time into me and my sister trying to help us understand the importance of saving and the power of compound interest. And through that he introduced us to investing. He gave me a book on investing when I was probably about 12 years old. And a lot of it was over my head. It talked about profitability of companies, margins, and whether you have a good manager managing a company or not. It was a lot over my head.
But one of the things that was really appealing about investing as a 12-year-old boy, was you could put money into account, and investment account. It will get invested into a stock or mutual fund or something like that, and it would grow over time (in theory) and you would take money out. And then somehow, you've got more money now than you started with and you didn't work. The idea of making money without working, for a 12-year-old boy, was pretty exciting news.
And so that lead me to try to learn more about it. Eventually, I was able to convince my dad, and I don't know if I bugged him or what. I think I bugged him, because I think I asked several times to open an account for me so I could invest into a mutual fund. I invested into a small cap world fund. It was probably in the first half of 2000 or so. I can't remember exactly when. But I do know it probably happened at its peak for its share price.
The reason why I remember so well is because in the following quarters I lost a lot of money. Well for me a lot of money as a 13 year old boy because I saved up the money to just have the minimum of open up the account. And it went counter to everything that I had read. That was a really good lesson though. Fortunately, I didn't sell it when it is at its low. I held onto it.
It was a really good lesson because it was something I would not have learned that you can lose money in stock market. It's not all about you putting it into account and it just grows. That's something I probably would not have learned had I just kept my nose in the books. By going and doing it I was able learn about capital gains, dividends, and how a mutual fund works, diversification, and, different kinds of mutual funds that are out there. And that was really, really, insightful thing for me to do at that age.
I have been running into a lot of people here today, saying that they want to invest but they are too sure about in investing right now. I think one reason why is because they are new to investing. And they are also concerned about all the uncertainty in the world right now. It's on the top of our mind. It's the first and see a Facebook. It's the first thing that we see on news feed, it's on the TV, and if you still read a newspaper it's in there too. The reality though is that uncertainty has always been there. I think that is one of the key lessons I learned as a young kid is uncertainty and risk.
When we are investing, we want to take the amount of risk we are willing to take. If you are somebody just starting out in the game, read, go talk to a financial planner or financial adviser, or somebody who has experience in the space. And go put a small amount at risk. Invest a small amount so you can begin to understand: how it works, what risk is, what kind of events influence the investment that you've invested in, and how all the puzzles start to come together.
The big lesson I learned was you can only begin to understand the game once you've played the game. So, I encourage folks out there to responsibly go and figure out how the game works by playing the game a little bit.
If you would like to learn more about my company Pursuit Planning and Investments, LLC, visit planyourpursuit.com. Or if you would like to learn more about me and what I think are the interesting things in the news right now with regard to the world of investing and financial planning feel free to sign up for the Planner's Beta. It's my weekly digest. I hope you have a great rest of your week, that you stay safe and healthy. And I hope to talk with you soon. Thanks!
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