Are you fed?

How not knowing to fish cost losses to a friend

Hi friend,

I must be hungry this morning.

You know the saying “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”.

​A friend of mine recently discovered painfully how in finance no one is interested in teaching how to fish because there is way more money to be made by selling the fish.

Want to beat the markets in any condition? Learn Mixed Active Investing here.

One morning he woke up questioning the performance of his family savings.

A trustworthy banker had been managing their savings for decades and he never thought much about it assuming the money was safe.

He couldn’t help wondering how the savings could have shrunk by 10% in 10 years instead of growing.

This was before the pandemic hit.

As hints of a pandemic were starting to make the news, my friend got the sudden idea that it would be smart to pull out all money from investments. He figured a global shock could not be a good thing so better safe than sorry.

His banker convinced him that while there was some sense to the worry, taking out the money was not the way to handle the situation.

So he did nothing.

My friend was never interested in investing. He cared about managing his business finances and was happy to let experts take it from there in regards to investing.

The pandemic hit, the markets crashed. So did my friends trust in his bank.

In financial markets, money moves from those who don’t have knowledge and skills to those who do faster than in any other space.

Tired of not being able to understand what the bank was doing and having no counterarguments to their suggestions he decided to learn to invest for himself.

This is how I learned of this story as he came to me and is literally devouring his way through the “learn to invest confidently in 30 days” course.

I was personally baffled when I learned that the 10% were lost in the decade between the financial crisis and the pandemic. This was one long bull run decade on the stock market basically. The same reason dollar cost averaging and FIRE is super popular in beginner investor circles.

Apparently the bank had a mantra that stocks are too risky so they limited my friends’ money to be invested in bonds, as far as I understand.

To be fair to the bank, I’ll take a wild guess that my friend was asked for a risk willingness profile and he opted to keep the money safe.

This is what happens when you don’t know.

It’s like going to the fish shop never having eaten a single fish in your life.

You won’t know what to buy. How to prepare it. How to cook it.

The shop owner will do his best to help you, but without some common ground of understanding you will still end up buying the wrong fish and having a lesser meal than you expected.

If you don’t know how to invest, you won’t understand what your bank is recommending and you don’t know what risk really means.

You won’t be able to understand how the bank is investing your money and to judge whether you think it is a good idea or not.

Investing is never a guarantee.

When you let someone else invest for you, you are paying a comfort fee for not having to make decisions.

Comfort can get expensive.

In my experience this applies to many areas of life.

So where can you risk buying the fish and where is it better to learn how to fish?

And what if the fisherman stops fishing for you?

Food for thought. Now I better have an early lunch and stop the puns and metaphors.

Have a good one,

​Chris

Thank you for reading! :)

You can find all past letters here.