The Importance Of Investing Money: Conclusion
Hello dear,
Another victory! You’re currently reading the final letter in my “Invest Money” series!
Whew… We’ve come far.
Next week, we’ll begin the “Make Money” series. This will be composed of 13 letters. After that, we’ll wrap up Personal Finance Series 🙂
For now, let’s take a step back and recap everything we’ve learned about investing for the past 13 weeks.
Why Should You Invest?
I’ve written about this in detail here, but have to add one thing.
Growing up, I (and probably you, too) wondered what to do with money once I started making it (“How do bills work? How do taxes work? What’s a 401k??”).
One thing was certain, the answer wasn’t “buy whatever you want.”
Sure, buying things can be fun. However, I’ve met people in their 60s+ who wish they “had more money to do X.”
Chances are, you’ve met people in the same situation.
The problem is, they can’t go back. This leads to regret (which could have been avoided).
Regret scares me.
Hence why I’m skeptical when I hear societal maxims like “live for today.”
Don’t get me wrong, we all agree that enjoying the present is important (when you’re a meditator, this is the first thing you learn).
However, “live for today” itself is a trap.
Very few people agree with me, but I believe this to be an important truth.
The person who spends time building the ark (while everyone else “lives for today”) is the person who’ll survive the flood.
Sidenote: A good experiment that parallels this metaphor is the Stanford Marshmallow Experiment. Children who passed the test grew up to be more successful adults (by many measures) than children who failed the test. Why? Because they ignored “live for today.”
This especially applies to finance.
Don’t spend your money today. Let it grow and give you much more. Replace today’s spending for tomorrow’s peace of mind.
This is why you should invest.
That way, you’ll reach your 60s+ without ever saying “I wish I had more money to do X.”
You’ll have the money.
Invest Money — A Summary
So, how do you invest? Let’s summarize everything we talked about for the past few weeks:
- Obviously, educate yourself! Read great resources on investing. Thankfully, this blog is a good summary.
- Don’t rush to get a financial advisor. Having a bad advisor (which is statistically very likely) is worse than having no advisor.
- Also, don’t try to imitate the pros. Their success is a result of many many factors (knowing Lebron James’ workout won’t turn you into the best basketball player in the world).
- What’s your investment goal? To retire. To let your money work for you instead of the other way around. You can achieve that using this number.
- Build a diversified portfolio that fits you. You can learn how to do that here. It’s really easy especially once you learn about Vanguard Index Funds (for any questions, just call Vanguard! They’re great).
- Afraid of worst-case scenarios? Me too. Hence why it’s good to learn how to be “Black-swan-robust.”
- However, the greatest threat to your investments is you. This is why it’s good to have rules. One of my rules (for Index investing) is buy and don’t sell for at least 30 years.
- Sure, at some point the economy will go down (and so will your investments). But this happens all the time. After going down, the economy goes back up. You have to hang in there and think about investments in terms of decades, not days.
- Finally, to help you cope with economic downturns, learn how the economy works. You’ll see many recessions over your lifetime, big deal.
And that’s it for today!
Thank you for reading my letters. I hope this was valuable to you.
See you next week (follow the series here to be notified).
Be well.
R
P.S.: The universe works in mysterious ways. Coincidentally, today Ray Dalio released his book “Principles.” I haven’t been this excited for a release since the first Avengers movie came out. Now if you’ll excuse me, I have some reading to do 😃
Since I write about finance, legal jargon is obligatory (because the guys in suits made me). Before following any of my advice, read this disclaimer.
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