My grandfather taught me everything I know about investing, saving, and finances. He was brilliant and changed my life for the better. Some of his wisdom deserves to be shared.
- Figure out your goal and then find someone who has achieved that goal. Ask them for advice. Mirror their dedication and follow their lead.
My goal was to become financially independent as early as I could. My grandfather retired early and it allowed him to plan his own day and see his family anytime. It made a huge impact on my life and I wanted to be just like him. I let him know my plans at 15 and asked for his mentorship so I could retire by 35. I wanted to copy his success so I took all the advice I could get from him.
Find that person IRL or online. Don't follow trends and try to come up with some novel way of getting rich quick. Spend that time and energy figuring out your goal and mapping the steps to get there. Have your mentor give you advice on your plan and how to get there.
- Invest in what you know, not what you think you know.
As soon as I understood the concept of the stock market and "owning" pieces of companies, I wanted in. I wanted to own Disney. It had a huge impact on my life with so many happy memories for me from films to vacations. They were innovative and I understood their business. Disney was going to continue to grow for years and years. I begged to have the stock. For Christmas, my grandparents gifted me 1 share of Disney stock in a frame. It was beautiful and meaningful and the perfect present. My grandfather offered to assist me buying more Disney stock once I was able to work part time. When the companies annual report arrived I was thrilled. There was so much information about the company that I never knew. It talked about future plans for the company that I was blown away by and a lot of terms I didn't understand. It took me two months to get through the report cover to cover and understand it, but my knowledge about cash, capital, debt, investors, voting, shareholder value, profit and loss, and legalese expanded exponentially. I thought I knew everything about Disney but I didn't know shit. I wanted to own Disney stock because it was cool, nostalgic, a company aimed at my demographic, and looked like it was doing well. I bought stocks on my gut, which is stupid.
I bought the remainder of my Disney stock based on research. Real, actual comparisons to competitors, the market, and long term growth strategy, instead of my feelings. Investing is not feelings, it's analyzing current and historic data and doing due diligence on a company. Don't follow the crowd, pick based on gut feelings, or buy things that are trendy. Do your homework.
- High Risk, High Rewards
My grandfather made me buy some safe bets. Lots of long term growth mutual funds and market index funds and of course some Fannie May with 6% returns (back in the day).
I hated it. I wanted to buy stocks and make a shit ton of money ASAP. If I wanted to buy stock, I had to basically do a book report and presentation to my grandfather to convince him it was a sound investment. When I was 18 and controlled my account I was going to buy soooooo many stocks. I was so naive. My grandfather taught me that a sound investment isn't made in 30 minutes. If I didn't do research and understand what I was buying, I shouldn't buy it. I didn't have to become an expert, I just had to understand my risk. If I couldn't take the time to understand it, I shouldn't be buying single stocks. Instead, I should be buying funds put together by professionals.
On the occasions that I did my homework, found a company that I wanted to invest in, and made a convincing argument, he'd make me also talk to his broker. Usually they disagreed with me. They challenged my assumptions and made me fight for the company. I always came away learning something new.
- Just because a stock is right for you, it's not right for everyone.
My grandfather and his broker never liked the stocks I picked. I was going after tech companies. As a retiree, my grandfather wanted low risk, consistent return investments. His broker was middle aged with a family and was a little more aggressive but knew nothing about the tech sector. When you buy stocks based on assumptions, you are gambling. When you buy stocks based on research, understanding, and potential, you are investing. Most of my picks had potential, but were extremely risky. Since I was young and didn't have a family to support, I could be very risky. If I lost all of my money, I could just keep working and replace it. The smart thing to do in my situation was to be 80% risky and 20% low risk. I wanted growth but there were many investments that would provide safe, but low risk returns. I could take chances, but I couldn't be stupid. No one knows the future, so prepare for it with diversification.
My grandfather taught me to never just take others advice. Your situation is unique. He would never invest in these tech companies. My investments were very risky and he would not buy them. That didn't mean I shouldn't buy them. My situation was different than his therefore my investments should be as well. Most of my investments turned out to be great and give me great returns, but some kicked my ass and made me learn something new.
Tl;dr Investing takes work and practice. Buying stocks is a risk, but with due diligence and research you can lower that risk and make better investment decisions. Follow successful people.
Submitted April 23, 2017 at 09:48PM by comfortxcute http://ift.tt/2pV7mKc
