Sunday 4th November 2018
One of the reasons I blog about investing, is that it can be hard to find people who want to talk about investing in my everyday life.
Perhaps my biggest discovery as I move towards financial independence is that I am able to see things that I simply never noticed when I was working full time. Most of us are so caught up in the day-to-day running of our lives that we fail to see the bigger picture right in front of us.
It wasn’t until I started working part time, that I had the time and reflect and see the world for what is really is. I started to see everyone running around like headless chickens.
On my school run, I see parents dropping their kids off driving brand new cars and rushing to their job - a job they need to make sure they can make next month’s car repayment.
I see mothers dropping their children off to creche before going to work for the rest of the day - having never calculated the fact that they may not be much better off than if they spent the day at home with their kids. Most people fail to take into account the fact that they are paying for childcare, clothes for work and transport costs with after tax money.
Then there is me - driving around in a car that is 13 years old, wearing non-branded clothing, but being able to go about life at my own pace. The ability to watch and reflect is something which I truly appreciate while I see other people rushing to get from A to B.
When you work less, you have more time to think, and it is thinking that has allowed me to invest wisely. I get to take the time each day to monitor and plan my investment strategy. I can think about where I am spending money and how I can make more money. I have the time to budget and plan ahead.
In September, I arranged a visit with my accountant. We sat down, and I said to him “I just wanted to discuss a few things related to the 2019 financial year (which started in January)”. He looked at me amazed and said “jeez, I still haven’t processed most of my clients’ tax returns for last year and you’re worrying about next year already?”. This is the power that time gives you - it allows me to reflect and make sure I have all the answers before I make any financial decision.
I met a friend for a drink on Friday night. My friend had a baby recently, and we often talk about the challenges and joys of parenthood while we enjoy a pint and relax while reflecting on some baby-free time.
I’ve always seen my friend as a real risk taker. He’s travelled to more than 50 countries, he has parachuted out of a plane and is a regular gambler, betting on sports events and has won and lost big over the years.
He mentioned that he had saved up some money that he planned to give his child when she turned 18. I asked him where he was keeping it, and he mentioned he was saving it in the bank. “You could probably do a little more with it than that,” I said. I continued to talk about the power of investing and tried to get him thinking about how he could make that money work a lot harder than just sitting in the bank.
Eventually, I asked him if he would consider taking out €500 of his saved money to use it in an initial investment to just experiment a little. He looked at me and said “I’ve struggled to save this money as it is, I just can’t afford to risk it if something goes wrong”. Even after I tried to tell him I would guarantee any losses, he still wouldn’t budge - I could tell he saw investing as the riskiest thing one could do.
What he failed to see wasthat by saving money, the true value of that money will be less and less every year. Over the next 18 years, that money will be eaten by inflation - it will be worth a lot less in 18 years’ time than it is today.
In my mind, the riskiest thing he could do is leave that money in a bank account because of the missed opportunity cost. The worst part is, by not investing, he won’t learn anything. So many people can’t even get themselves to a position where they have money to invest - my friend is in a position where he has money that he doesn’t plan to spend for a long time, but he is too scared to invest it.
I reflected on it later that night when I got home. Here was a man who has taken so many risks in his life and is happy to make a bet at the bookies even at the most extreme odds, yet when it comes to investing, a game where the odds are actually in your favour, he wasn’t able to make the first step - even when he had the guidance of an experienced investor to help him.
Investing isn’t scary. Investing is like everything else in life - you just need to start! I often compare investing to flying a plane. I have no flying experience and if someone were to make me fly a plane today, I would find it daunting and I would most likely crash! However, with education, training and a decent teacher, I could learn to fly a plane and I wouldn't find it scary anymore.
The scariest part about investing for most people is just the unknown. The only way you are ever going to find out what investing is really like, is to actually take a step and try it. You will make mistakes - we all do, but in the long run, as long as you learn from those mistakes, you will make it as a successful investor.
The key to being a successful investor is to remove any emotion you have about money. The best investors try to remain emotionless - they don’t panic when things start to go wrong, and they don’t over-celebrate when things go well.
For me, investing is all about curiosity. I want to see what will happen next. I have been able to find good investments, because I had the guts to try them out in the first place. I’ve also invested in things that I shouldn’t have and have had to manage that along the way - that’s all part of the investing game!
When it comes to investing, at some point you’re going to need to make that first step. The key thing to remember, is that the riskiest thing you can actually do, is not invest at all.