Be a fundamentalist, not a fad chaser.
Investing “buzz” is going to hit your radar at some point in your life.
You’ll be having a conversation with your friend, a colleague, a cousin, and they’ll mention…
Did you hear about that whole GameStop thing? My boyfriend’s best friend just won thousands of dollars on that stock. Do you think you’ll buy in?
My friend just told me about this foreign tech company that’s going to hit big in the next few months, but not many people know about it yet so you should think about investing now while the stock is cheap. I just bought $10,000 worth.
Did you hear David and his wife just flipped a house and made over $400,000 on it! If it were me, I would take my savings and get into the real estate market, like, now.
These conversations will do three things:
- Give you the worst FOMO of your life.
- Spark a fury of questions about your own investments.
- Launch you into a mad Google search that will lead you down an investing rabbit hole.
Search: What should I be investing in right now?
Search: Flipping houses for dummies.
Search: What is Gamestop?
Search: How can I make $400,000 immediately?
Search: What does Elon Musk eat from breakfast?
And this is when your head will start to explode.
There will be countless articles and “expert” opinions flying at you left and right telling you to PUT YOUR MONEY HERE and INVEST YOUR SAVINGS THERE.
And then? Then you’ll get overwhelmed and admit defeat for the day.
You’ll shut the laptop, open Instagram and continue watching GoCleanCo’s story reels on how to clean your heater vents.
Ahhhh. Sigh of relief.
Until the next big investing news hits and the cycle starts all over again…
Conversations like these are inevitable.
Everyone wants to validate their investing choices.
Everyone wants to feel like they’re investing in the right things, at the right time, with the right people.
And that’s ok. It’s normal to want to confide in people we know and trust, especially when it comes to our money.
But what works for your friend may not work for you.
Maybe she’s ok losing $10,000 in the stock market. For her, it’s just a game.
Maybe that friend of yours got his “exclusive top secret tech company” info from a podcast he listened to. And that podcast that has over 1 million downloads a day….
Maybe, that couple who capitalized on that house flip bought that house years ago when the market was cheap, which gave way to the big gain now. Did they forget to mention their parents gave them the money for the down payment and let them pocket the entire gain?
The truth is, people like to talk. And just because someone is good at talking does not make them good at investing.
So, what does separate a good investor from a bad one?
Usually, only one thing: good investors are fundamentalists. Bad investors are fad chasers.
The investors who understand the core principles of investing AND stick to them when the rest of the world is screaming about the newest, hottest “buying opportunity”…those are the ones who end up successful.
They aren’t trend chasers.
They aren’t bandwagon jumpers.
They capitalize on the grassroots concepts of investing and get rich SLOW.
In other words:
Your #1 goal in investing is to avoid playing the short game.
And in order to do that, you need to know the 4 investing fundamentals.
Fundamental #1: There is no “Get Rich Quick”. Investing is a long-term game.
There is no such thing as “get rich quick”.
This is true in life and it’s true in investing.
A good analogy would be those who become **seemingly** famous overnight.
When people see other’s successes online, it looks immediate. It looks like they suddenly hit it big with little effort or struggle.
But what we don’t see is the inevitable years and years of toiling, grinding and losing they undoubtedly faced on the road to becoming “insta-famous”.
Investing is the same way. Those people you hear about who suddenly made a killing on bitcoin, or marijuana, or Tesla stock have likely been investing AND losing in that industry year after year after year before that big win.
You just hear about the win because it’s a better headline.
Tune out the noise and don’t play the short game. Invest for the long term and give your money the time it needs to grow.
Fundamental concept #2: Diversification is Queen.
In other words, do not put all your eggs in one basket.
The world is an unpredictable place and depending on what happens, certain industries, sectors, and investments will get hit differently at different times, with different magnitudes.
Spread out your risk by diversifying over several different industries, companies, and products so when one is tanking, the others are lifting you up.
Fundamental concept #3: Nobody can time the market, nobody.
But my friend’s husband is this super successful Wealth Manager. Surely, he can time the market.
Nope, he can’t. No one can.
As much as people like to think they is the case, it isn’t.
Unforeseeable events like pandemics, wars, Elon Musk lighting up a joint with Joe Rogan on his podcast will wreak havoc on the markets in a way we can never predict.
So good investors don’t.
Instead, they use dollar cost averaging to take timing the market out of the equation.
Dollar cost averaging is putting your money into an investment on a regular basis to avoid the pitfalls of timing the market incorrectly.
For a lot of you, this could look like regular RRSP or TFSA contributions on a monthly basis versus one big annual lump sum.
In the words of Morgan Housel, “Good investing is not necessarily about making good decisions. It’s about consistently not screwing up”.
Dollar cost averaging helps you consistently not screw up.
Post by: Nicole Putz, CFP
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