My Beginner’s Understanding of Investing – Part 1: Just keep reading…

Up until now I have been focusing on getting my head around the basic concepts of early retirement/financial independence (i.e. reduce spending and increase saving) and putting that into practice. Now that we are feeling comfortable with our balance of spending and saving (and consistently saving 66% of our income after deductions – can I get a “whoopwhoop!”, dear Reader?) I now feel ready to tackle the next learning curve: what to actually do with all the money we are saving.

Before even thinking of investing, the unanimous first two rules from everyone seem to be:

  1. Get debt-free. The idea is that you are most likely paying much higher interest on debt that you owe than that you could ever earn from an investment.
  2. Create an emergency fund. From what I gather once you’re securely on the path to financial independence it’s debatable if you still need an emergency fund (because you will be living well below your income with lots of investments that can be cashed in if need be) but initially it’s a necessity (for peace of mind and to avoid getting back into debt). The key with your emergency fund is that it is ONLY for emergencies. And a trip to Paris or a new dress for your cousin’s wedding is not an emergency.

Ok. That’s pretty straightforward. Nothing too complex for us newbies to grasp.

The next bit, the actual investing bit, however is TRULY like trying to learn a new language. It’s really easy to get intimidated, overwhelmed and consequently give up all efforts to learn anything at all. I remember feeling a similar way when I first started reading psychodynamic theory. After months of reading the stuff I eventually went to my supervisor and gave her the bad news that clearly the theory is too advanced and I will never be bright enough to understand it. Ever. She laughed and told me to keep reading. She said I needed time to digest and ingest the concepts. I thought she was crazy (and couldn’t believe she didn’t try to explain the concepts to me herself like I thought that she would). But I took her advice and kept reading. And to my utter shock she was right. A few weeks later it suddenly all started to click and slide into place… and now I struggle to understand how it was that I couldn’t understand what I now think of as ridiculously logical and straightforward. So I’m applying the same lesson to this scary-ass financial world… just keep reading and give myself time to digest and ingest the concepts. Don’t panic. Don’t chastise myself for not knowing. Just keep reading.

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South Korea (July 2016)

Xxx

 

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6 thoughts on “My Beginner’s Understanding of Investing – Part 1: Just keep reading…

  1. I myself want to start investing, but as you said yourself, everything is so confusing and and there is so much of data to go through. I will definitely continue reading in the hope that I start to understand

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  2. So looking forward to this series as I often give up reading because I feel so overwhelmed by the investing information. I’ve got a financial advisor I work with and currently my thought is as long as I’m seeing gains we’re good. Not the best motto and not the smartest thing considering all I’m doing with my own budget.

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  3. Pingback: My Beginner’s Understanding of Investing – Part 5: The Equity Risk Continuum | The Brat Experiment

  4. Pingback: My Beginner’s Understanding of Investing – Part 7: Passive Investing | The Brat Experiment

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