My Accounting 101 professor back in college had ginormous biceps. He’d flex them menacingly as he paced Huntsman Hall, and the fear of getting our heads crushed between his guns stopped my buddies and I from falling asleep during lectures. But even though I managed to stay awake most of the time, I still pretty much sucked at accounting.
I just couldn’t get it right. LIFO, FIFO, depreciation.. these terms flew over my head as if I was learning a foreign language. I could never get my balance sheet to balance. (I did get pretty close once though – I was off by about $10, so I stapled ten bucks to my assignment and submitted it. My tutor returned my money with the note “Very funny, Lionel”.) I signed up for Accounting because I thought that it might be “useful in the future”. I understood the concepts theoretically, but whenever I had to apply it to a “real world” context, I ended up more confused than ever.
Have you ever tried to learn something, but hit so many barriers that you sometimes stopped and wondered, “Why the hell am I torturing myself like this?”
I feel like most people might feel that way about investing.
Failed Approach #1: Learning Technical Analysis From Books
“How do I start learning investing as a beginner?” is one of the most common questions I get from members of my VIP List.
I can totally empathise. When I first started learning investing, I was completely overwhelmed by the number of books, courses, strategies there were out there. As a young, clueless 18 year-old, I’d head to Kinokuniya and just stare dumbfoundedly at the shelves and shelves of investing books, wondering which one I should start with.
I’d pick a random book, and get immediately bored by the pages droning on about some technical, obscure detail that no one cares about. I did want to get rich though, so I forced myself to learn the technical analysis strategies that I came across. I eventually got good enough to program them into this expensive software I bought, and started trading those strategies against cold, hard data.
And you know what I found? That none of the strategies I read about worked over the long term. Something just didn’t add up.
Failed Approach #2: Trading Seminars
After a few years of failed testing, I figured that there was probably something the books weren’t telling me. So I started searching for investing and trading seminars instead. This turned out to be an even worse idea.
I remember attending like a dozen of those “Get Rich Making Big Money Investing In Forex/Stocks/Gold” seminars. They were almost always run by a guy in a suit with terribly-designed PowerPoint slides. He’d spend 80% of the lecture giving dumb, generic tips like “Before you start investing ah, you must know your risk profile. Know your what?” Then the audience (mostly made up of uncles and aunties) would chant in response, “Risk profile!!”
It felt like I was in kindergarten all over again.
None of these approaches worked for me. Technical analysis books were interesting, but their strategies didn’t stand up to the data. Investing seminars might help to rah-rah the crowd, but they lowered my IQ by 20 points every time I attended one. There had to be a better way.
What Frustrates You?
Since then, I’ve been fortunate enough to read a few good books on solid investing principles (you can find some of them in my Reads section). I also spent years researching, which led to the index investing strategy that I practice today.
I know that as a beginner, it can be overwhelming to try to figure out where to start. Even as an “experienced” investor, it can get frustrating to try out multiple, failed approaches. I know, because I went through that very same path myself!
No one should have to go through all that frustration when learning something as essential as investing. That’s why I’m thinking of creating a free guide to help point beginner investors in the right direction. I want to make it simple, no B.S, and in a language that talks to you like a real person – not a Finance professor or a primary school teacher.
But before I do, I’m curious if you could share your number one frustration when it comes to learning investing.
Is it trying to overcome an overwhelming sense of boredom while you’re reading an investing book? Is it figuring out whether someone’s trying to scam you? What have you tried as you were learning investing, and why didn’t it work out for you?
Be specific – I want to hear the details, and I’m curious to hear everything you have to say. Leave me a reply in the comments below, or send me an email. I read every one.
Image credit: UGL_UIUC
Ahhhh! This is something that I can relate… being a newbie to the investing game, besides the technical jargons (ROE, PE, CNAV etc…) that need lots of time to digest and understand them, the other challenge that I find is that after understanding the use of these indicators, what is/are the benchmark that we should be looking at. For example, What level of PE is deemed positive sign etc.. Of course, I did found the answers later on but that is much later.
Also, real case example (i.e. figure from the real stocks) would help to drive the understanding better.
All the best in your new venture.
Cheers!
Thanks Richard for the feedback! I’m confused though, wouldn’t you have learnt about the benchmark or positive signs when you learnt about these indicators? For example, when learning about PE, most strategies that use PE would have a mention about when it would be a “positive sign.” 🙂
Not all books that I read do that.. Some just explain the meaning and their importance but never mention about the benchmark, but I did found some other books do give bits and pieces ie not wholesome! 😉
Got it, thanks! 🙂
For me, it’s the technical jargon in investment books as well. I fell asleep reading them….
I also attended some free seminars just to get a few pointers (like A*** K***’s), then realised they were all prelude to an “in depth” course which you have to paid a lot more for. I also encountered the chorus-y part, and it left a bad taste in my mouth. I left halfway.
Thanks V! Yes, those sessions are annoying aren’t they 🙂
Guidebooks, like the one you think of doing, are always a good idea. To be successful in personal finance, one should have to completely buy into the 4 fundamental aspects of Earn (more), Spend (less), Save (more) and Invest (more).
I have been haphazard in terms of personal finance, especially in saving and investing. I can only count myself lucky that the good stock tips I have received are more than the bad ones. Still, although I have been late to the game, I have really gotten my act together the past year and the journey has been great so far, reading the various finance blogs and being very selective in attending those seminars you mentioned.
My feel is that people (me included) just dive right into the “Invest” part of things, and tend to neglect the other 3 fundamentals. For example, one may not have saved enough for an emergency fund and heads right into investing. He may then chance upon a good way to invest and pumps a whole lot of cash into that investment idea/strategy. But if he doesn’t have a backup emergency fund, it is almost no different from gambling.
Getting our financial house in order is key before we start investing. A guidebook that points the way in terms of the 4 fundamentals of Earn, Spend, Save and Invest would at least provide a good framework for a beginner. At least that’s something I wish I had when I started out. That would have saved me a lot of time navigating through the interwebs.
Thanks MT for the super detailed answer! I wholeheartedly agree with you, and in fact I did try to write a book a couple of years ago on Saving, Spending and Investing. However, it turned out to be a gargantuan effort and I just couldn’t finish it. I ended up writing a book focusing solely on investing (www.cheerfulegg.com/automatic-investing), and I found it was a lot better because I could include a whole bunch of details that I otherwise would not have been able to write. Maybe I’ll write that big book on the 4 fundamentals you mentioned in a couple of years 🙂
Don’t forget “Insure (more)”
On a side note Lionel, I totally relate to steps 1 and 2 (in that exact order in fact). I even bought books on candlestick charts, types of options, types news releases and how to interpret them. Seriously, whatever you need to know or there is to know is already on the net. Most of them even offer more insight than these shallow paperbacks.
My burning question though…. We have seen that “one doesn’t need a business degree to do business”.
Shall I hold onto my faith and bank on the belief that we don’t need to graduate with a banking/finance/accounting/$$$-related diploma/degree to be successful at spot-investing? (stocks, forex, options in particular)
I’m actually more than halfway through Automatic Investing. 🙂
Keep the interesting articles coming in!
I think I would really appreciate a step-by-step idiot’s guide to investing in Singapore. For instance, for managed funds, what are the different platforms available, what are the pros and cons of each, features available, and perhaps a pictorial guide to actually buying into a fund. I got the above from my financial advisor, but he isn’t willing/able to share the same info on where I should go if I’m interested in investing in equity.I started a POEMS account but got rather overwhelmed by it and it’s been inactive. I then realised that there are actually several other platforms available in Singapore, so I’m not sure if I should explore those, or try to figure out POEMS instead.
Thanks!