Oftentimes, we consider buying stocks and bonds as an alternative to leaving the money in a savings account, or a quick way to double our money. We hardly view buying stocks and bonds the same way we view starting a business or partnering with a friend to start a business.
In today's post I'm going to set our perspectives right.
While in the University, whenever a student dies, especially a final year student, we often lament the fact that he was a final year student more than the reality of his death. You'll hear people exclaim, "Oh, after all the years of investment and hard work to get here. And he was just 2 months from graduation. Oh, what a terrible world."
We all view the 20+ years of our lives spent in the four walls of a learning institution, reading for and writing exams, as an investment. And it's true. Nowadays, at the age of one, a child begins [pre-]school, moves to kindergarten, then nursery school, then primary school, then secondary school, and finally the University. And some spend close to a decade in the university, doing postgraduate courses after their undergraduate study. And why do we readily do this? Because we see it as an investment.
Once in a while, we meet old friends who have gone on their own. They now run their own businesses. You rub minds and they tell you that going on your own is always worth the risk, that the long-term returns and ease of life is better than anything you can get from any company. You begin to consider investing in a business idea you have. You take it so seriously that you begin taking special training, going for seminars, getting a mentor and buying relevant books. And why? Because we know that running a biz is no small task and one needs to build up to it.
Unfortunately, whenever we think of investing in the stock market or buying bonds, we see it as a hit or miss venture and not something to take seriously as a masters program or an entrepreneurship course. We hardly read 2 good 600+ pages book on it. We don't take finance courses for the sake of investing in the stock market. Why? We've got the wrong perspective on financial investments.
Buying shares is as much a serious business as setting up a Drug manufacturing company. At least, that's how serious I take it. I have my entire life-savings in the stock market, and I'm not a bit worried. Why? Because I see it as a business. I build up to it. I stretch myself more than I did to get my undergraduate degree. For once in my life, I'm putting my head where my money is. Every knowledge I gain is having a direct impact on my [stocks] business. Like a real business, I have had losses and rebounds. I have gone through the basics and history, I have studied for it harder than I did to get my CCNA and OCA. And I know that it's not enough. A business doesn't grow on knowledge. It grows with experience, deliberate plan and actions. And after reading over a century span of great books and MBA finance textbooks, I've found that it's just like being a core Telecoms engineer. You take a long arduous path to becoming one, but everyone outside thinks you're a special being, and that you do magic daily. Or being a doctor; no one even argues with you; you are next to God to a lot of people. And that's the way we all view Warren Buffett and other successful professional investors.
The truth is that Malcolm Gladwell is right; you've got to pay the 10,000 hours due to be great in anything. You can't think your way out of it. Knowledge can never take the place of experience. But experience built on the wrong knowledge will take you nowhere.
So what is the right perspective on investing?
It's a long term thing, like running a business.
It requires lots of man hours and brain work, more than doing a masters.
It requires sound knowledge of finance, financial accounting and macro-economics.
It requires dedication in cash, time and study.
And if you think you're fit enough for it, then get a note book and a dedicated pen 'cos I'm going to show you all I know. And be free to look out for faults in them.
Above all, you'll find the finance and investment world very interesting.