Look Before You Leap With Investment Education

New investors get some mixed messages from seasoned investors. On the one hand, you’ve got the old school rich folk saying “start investing today! You’ll have so much more time for it to pay off if you do it right now!”. On the other hand, you’ve got people saying, “Investment is about learning and mastery of certain theory. If you don’t know this stuff, it’s better to do nothing at all rather than risk losing money.”

I am neither a beginner nor a seasoned investor. So, I guess I lie somewhere in the middle. Sure, I understand that an investment made today (or better yet, 15 years ago) will have had a lot more time to develop and grow through compound interest. If you’re unfamiliar with compound interest, it’s an investment growing and then kicking off annual dividends. These dividends are then reinvested, used to buy up more stock (or whatever it is you’re invested in). This gives the investor a greater lump sum of investment with which to grow further value and, eventually, wealth. It’s basically a snowball effect, but with money.

The thing is, new investors will never get to this point if the early investments that they make are nearsighted or foolhardy. So if you want to become an investor: read read read.

Now, from personal experience, I know that this advice is likely to do more to keep someone from ever investing at all than it is to make someone work really hard to become a great investor. Learning is hard. You and I live busy lives, and we don’t have a lot more time to read long tomes about dense subjects. That’s why we respect people who learn stuff, but we don’t personally do it ourselves a lot.

So to my “read read read” admonition I add “invest invest invest”. Without putting down actual money on the line, you’re unlikely to put forth the kind of interest and attention necessary to get real knowledge and insight. Just think, there’s no better kind of learning that you can do than intense situations where your actual performance is on the line. Think about when you played soccer in middle school. What did you learn more from, watching soccer on TV or playing in your first game?

The same holds true for investment. There are many web portals which enable you to “invest” without actually laying any money on the line. You can do forms of day trading using CMC markets. Or you can see how your more long term investing decisions would go, if you invested today in stuff like mutual funds, real estate, and ETFs.

I advise doing as much learning as you can stand, then doing some actual (low-risk) investment on the side. Not all of the investment models I mentioned in the last paragraph are truly “low risk”, but they are all unlikely to work out badly if you simply don’t use too much money in any of these pursuits. Start by investing $10 or $100, and see what you can do with it. Sure, losing that much money won’t break you, but you’ll love it if you can double it or more! By combining theoretical learning with low-risk real world practice, you’ll be an investor in no time.

Look Before You Leap With Investment Education

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