Think First Before Investing
Think clearly and you can avoid dumb mistakes when you invest.
First of all, remember that you don't necessarily have to be a professional or have "specialized" knowledge to successfully invest. In fact, if you're willing to put in the time, you can probably do a better job than most "financial advisors" out there.
If you're willing to put in the time, that's great. But before you start reading and studying all sorts stuff about investing or financial planning, I suggest you do something really important first: think. What I mean is that you can read and study tons of stuff - a lot of it available for free these days on the internet - and just wind up confusing yourself. So the first thing to do is make your mind up to really THINK.
The thing is, I wonder whether most people either can or want to take the trouble to think at all - about anything. Do you know what I'm talking about? I hope so. Because it's really true. A lot of people walk around with their brains shut off. Just watch and listen to people you work with or with whom you come in contact during the day. You'll see what I mean.
Here's a quick example.
The country's economy is laboring under a mountain of debt created over the last 30 - 40 years. The government has piled up astounding, all-time record-breaking mountains of debt. So what sense does it make to address all this by creating more debt? That's the essence of proposed government solutions at this point. If you're thinking cap is on right now, even if you know absolutely nothing about economics, tell me what you think about that solution. Well, does it make any kind of sense?
Okay, so you'll hear arguments from professional economists that explain why the government needs to spend more (which means they're creating even more debt). It'll sound like if they don't do that, the economy won't ever pick up. But just read the last paragraph and tell me whether you think that the government piling up even more debt could possibly make any kind of sense.
I think that if you really think, you'll think these economists must be nuts. You don't solve a problem by doing more of what caused the problem, right?
If you're too fat because you eat too much, do you eat more? Of course not. So why build up more debt if debt is one of the major causes of our current economic and financial crisis?
So you've just used your brain and by thinking you figured something out that's escaped a lot of professional economists. Piling more debt on our existing debt won't solve the problem of our having too much debt.
Now just think about some of the professional advice you may have received, like, let's say, that owning stocks is always a good idea, no matter when you invest. We've all seen all the arguments for this. There's tons of data about "if you invested a nickel in the year 500 BC, it would be worth sixteen quadrillion dollars today" - or some such variation.
But suppose you knew that in the 203 years from 1800 to 2002, the stock market would have frustrated you for 145 of those years. What do I mean by frustrated? Well, from 1800 to 1863 stocks went up and down. But the stock market was worth the same in 1863 as it was in 1800. Or more recently, stocks were worth even less in 1982 than they were in 1966. So if you were retiring at age 65 in 1966 and were doing some retirement planning with your financial advisor, and he or she told you had to own stocks to retire successfully, and you put a big chunk of your money into stocks - like 70% or something like that - by the time your were 81 that 70% of your portfolio would be worth less than what it was worth in 1966.
Do you think it might make sense to question this idea that owning lots of stocks is always a good idea? Maybe you'd want to do more research - and some more thinking - before following that sort of advice.
I'm not telling you what to do. I'm just suggesting that if you learn to think for yourself, you'll have a lot better chance of investing wisely.
First of all, remember that you don't necessarily have to be a professional or have "specialized" knowledge to successfully invest. In fact, if you're willing to put in the time, you can probably do a better job than most "financial advisors" out there.
If you're willing to put in the time, that's great. But before you start reading and studying all sorts stuff about investing or financial planning, I suggest you do something really important first: think. What I mean is that you can read and study tons of stuff - a lot of it available for free these days on the internet - and just wind up confusing yourself. So the first thing to do is make your mind up to really THINK.
The thing is, I wonder whether most people either can or want to take the trouble to think at all - about anything. Do you know what I'm talking about? I hope so. Because it's really true. A lot of people walk around with their brains shut off. Just watch and listen to people you work with or with whom you come in contact during the day. You'll see what I mean.
Here's a quick example.
The country's economy is laboring under a mountain of debt created over the last 30 - 40 years. The government has piled up astounding, all-time record-breaking mountains of debt. So what sense does it make to address all this by creating more debt? That's the essence of proposed government solutions at this point. If you're thinking cap is on right now, even if you know absolutely nothing about economics, tell me what you think about that solution. Well, does it make any kind of sense?
Okay, so you'll hear arguments from professional economists that explain why the government needs to spend more (which means they're creating even more debt). It'll sound like if they don't do that, the economy won't ever pick up. But just read the last paragraph and tell me whether you think that the government piling up even more debt could possibly make any kind of sense.
I think that if you really think, you'll think these economists must be nuts. You don't solve a problem by doing more of what caused the problem, right?
If you're too fat because you eat too much, do you eat more? Of course not. So why build up more debt if debt is one of the major causes of our current economic and financial crisis?
So you've just used your brain and by thinking you figured something out that's escaped a lot of professional economists. Piling more debt on our existing debt won't solve the problem of our having too much debt.
Now just think about some of the professional advice you may have received, like, let's say, that owning stocks is always a good idea, no matter when you invest. We've all seen all the arguments for this. There's tons of data about "if you invested a nickel in the year 500 BC, it would be worth sixteen quadrillion dollars today" - or some such variation.
But suppose you knew that in the 203 years from 1800 to 2002, the stock market would have frustrated you for 145 of those years. What do I mean by frustrated? Well, from 1800 to 1863 stocks went up and down. But the stock market was worth the same in 1863 as it was in 1800. Or more recently, stocks were worth even less in 1982 than they were in 1966. So if you were retiring at age 65 in 1966 and were doing some retirement planning with your financial advisor, and he or she told you had to own stocks to retire successfully, and you put a big chunk of your money into stocks - like 70% or something like that - by the time your were 81 that 70% of your portfolio would be worth less than what it was worth in 1966.
Do you think it might make sense to question this idea that owning lots of stocks is always a good idea? Maybe you'd want to do more research - and some more thinking - before following that sort of advice.
I'm not telling you what to do. I'm just suggesting that if you learn to think for yourself, you'll have a lot better chance of investing wisely.
Comments