Like most people, the things I am most thankful for have absolutely nothing to do with money. My health, the health of the whole Kung Fu Family, love, great friends, amazing experiences, and the chance to do challenging and rewarding work all top my list.
Money is way down near the bottom…and yet, money does enable many of those things to be possible (e.g. money to afford great health insurance, money to buy nice bottles of wine to share with friends, money to spend on those “amazing” experiences, money to start a new business, etc.).
So even though money is certainly not what I’m most thankful for, I am very thankful that I’ve learned to make peace with it over the years and have learned how to become a self-reliant, informed, and pretty darn successful investor. (Because as you know if you’ve read my story, I certainly wasn’t always!)
Over the years I’ve given investing a lot of thought and have come up with 3 specific investing insights that I am very thankful for and would like to share with you on this thankful week (here in the U.S. anyway!):
3. Investing is not “too hard”
There is a horrible myth prevalent in the financial community (which primarily stems from the “big banks” and large financial institutions) that goes something like this,
“This is too hard for you. You will never understand EBITDA and PE ratios and yields and interest rates and margins and cash flow analyses…and you’ll never be able to calculate the net present value of an investment let alone the expected future value!
Plus, do you really want to spend your time learning those “necessary” and “boring” things? They are extremely difficult, after all, much like brain surgery! And you wouldn’t attempt to do your own brain surgery, would you? Of course not!
So leave it all to us….we’re sure you have “better things” to do with your time, and we’ll “take care of all of this difficult investing stuff for you….don’t you worry your pretty little head! You just leave all of this complicated, complex, difficult financial ‘stuff’ to us!”.
When I first began investing, I totally bought into this. I had no idea how to pierce the veil of financial jargon (and that’s all that it is), and I honestly thought that all of this was “too hard”.
Luckily, though, I’m not one to back down from a challenge…
And sure enough, the more I dug into it, the more I found that these are not difficult concepts, and in some cases they are not even that necessary (or at least, not as important as other valuation tools or macro/big picture trends).
They are just like any other tool in your tool belt…if you can learn how to use a hammer, and when to use a hammer (instead of a screwdriver, for example), you’ll do just fine. (And how hard is it to use a hammer? Pick up hammer, whack it down on a nail. Avoid thumb. Done.)
2. Investing is not “too boring”
Unlike my college microeconomics course, which was dull, dull, dull!
One of the reasons I put off learning more about investing was because I was convinced I was going to be bored out of my mind (much like the terms above…EBITDA, price-to-book, etc…someone shoot me now!).
I have no idea what they are teaching in college microeconomics classes these days, but when I took it, my big “introduction” to the world of finance and economics, it was the driest thing I have ever had the misfortune to experience. Dryer than the middle of the Sahara. Bone dry. Haven’t-had-a-drop-to-drink-in-a-WEEK-I’m-going-to-die dry. Seriously, horribly DRY.
We spent our days struggling to calculate the integral or the many derivatives of the supply or demand curve for Product “B”, or computing the price elasticity coefficient for Product “X”. (Heaven forbid we use real products with meaning to college students, like condoms or beer or something…).
But thankfully, true investing is not like this at all. In fact, I don’t know any investors who use any type of calculus whatsoever….sure, they study supply and demand factors for a market, and even price elasticity, but they do so from a common sense perspective (wouldn’t you like to know how much gold there is in the world before you buy some, and also maybe how many people want to buy it and why?), not from a nerdy microeconomics perspective (with apologies to any microeconomics professors out there).
And the professional investors I’ve had the pleasure of meeting have all been just that…pleasurable! These are exciting, interesting, fun people who love a good challenge and have an insatiable curiosity—just the kind of people I like to hang out with.
1. Investing is as much “art” as it is “science”
I don’t know about you, but I enjoy studying history, sociology, and what makes humans “tick” much more than I enjoy calculating integrals and coefficients.
And studying the major macro and historical trends (“What is money?”, “What is gold?”, “Why did Hitler rise to power?”, “Why did the great Roman Empire finally fall?”, “What happened after the Great Depression of 1929?”, and many, many more) is much more fascinating and useful than calculating coefficients when investing.
So there you have ’em, my top three investing insights. I hope you find them useful.
Happy Thanksgiving to those of you in the U.S….I hope you have a great holiday weekend!
I’ll be back in your inbox on Monday with some insights from Day 1 of the San Francisco Hard Assets conference.
Thank YOU for reading and being a part of our Kung Fu Finance community!
To your financial success,
—Kung Fu Girl