Investing can be intimidating.
For one thing, money is undoubtedly serious. We protect ours with triple-encrypted cyber fortresses, passwords so complicated you need a whole separate system (with its own password) to remember them, and even physically, with bullet-proof glass and retina scans.
Money itself offers zero value for food, water, or warmth — unless you burn it — yet we enlist every safeguarding mechanism in our arsenal to protect these flimsy sheets of paper.
For another thing, the topic of finance lives at an intricate intersection of history, politics, business, technology, and social science, a domain that multiple PhDs can hardly decipher.
Because of these two reasons, a third emerges: we hire other people to manage our money, someone who we believe knows more about it than we do, which further degrades our own confidence.
(For more on our growing dependence on other people’s “expertise”, consider Michael Pollan’s argument about over-nutrition in which he asks, “What other animal needs professional help in deciding what it should eat?” and Steven D. Levitt’s argument about information asymmetry, stating “we accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer).)
Finally, if you don’t have a lot of money to begin with, it’s scary to cultivate an experimental mindset.
When I turned 27 I was gifted $1,000. I decided to make this my monopoly money; money I could experiment with, strictly for enhancing my financial confidence.
With my new fortune I checked out two books on socially responsible investing from the public library. I read just enough to realize that I knew nothing about the field of investing, and promptly discarded them back into the library mail slot. I really wanted this project to be fun. I wanted to be okay with losing the entire stash.
Next I called a friend who had been investing his own money for a while. He was doing things like day-trading and buying currencies, activities that sounded completely impenetrable at the time. Nonetheless he encouraged me to open a ThinkorSwim account, which I did. (The ThinkorSwim platform was less technical at the time.)
Upon arriving at the home page I was immediately assaulted by graphs, bars, and ticker symbols in Matrix green on a black background — surely an indication that I was in over my head. But I stayed focused on my prize: the Buy button.
When it comes to starting new habits or hobbies, the most important thing is to start, and figure it out later.
I began in 2008 with a pretty simple approach — an approach that turns out hasn’t needed too much adjustment over the years:
- Search for companies or industries of interest (names can come from word-of-mouth, reading material, products at the grocery store, local businesses)
- Look at their long-term performance (>10 yrs is ideal, >5 yrs is sufficient)
- Look for a generally up-sloping line (bonus points if the up-sloping line continues, or even stays the same, between 2008 and 2012)
- Identify which of these companies have affordable entries
- Click Buy
- Wait (a while) and watch (I like to hold everything for at least a year, usually longer)
Let me be the first to tell you:
You can manage your own money
It doesn’t have to be hard (or perfect)
You’ll lose some
You’ll win some
The longer a game you play, the more likely you are to win
With my $1,000 I bought some Green Plains Renewable Energy, which happened to skyrocket soon after, and some Ocean Power Technologies, which happened to crash soon after. So it all shook out. And you know what? It was FUN.
Since then I’ve decided that monoculture and feedlots aren’t really my thing, so now I’m looking to divest from GPRE and buy into Trillium’s Portfolio 21 mutual fund. These are the types of changes you can make as you get more comfortable. Remember, your strategy doesn’t have to be perfect right away (or ever, for that matter).
Inviting playfulness into personal investing can create space to grow confidence and explore opportunity.
Of course, the above story is predicated on having the extra $1,000 in the first place. As such, it’s important to mention another part of the story often left out: If you want to explore investing, it’s helpful to earn some extra money. And it doesn’t have to be $1,000, either. You’ll find stocks and mutual funds to buy for under $10 if that’s what you have. Just think: you could buy one stock instead of two cups of coffee.
Investing is a vast topic that has grown quite complicated, and for the average person managing his or her own money, we won’t engage in 90% of possible investment activities. In reality, the idea behind investing is quite simple: you loan your money to someone else and s/he pays you back with interest. You don’t need to know anything about margins, buying power, shorts or longs to click Buy.
I now get annual notices when companies I own stock in have shareholder meetings. By attending I can elect directors and hear insider details about the company’s performance.
I love feeling like a participant in the financial system rather than a victim of it.
It’s especially fun to invest in companies you are connected to, like grocery stores you frequent or products you regularly use. The sense of ownership is empowering.
A wise woman once said:
Keep it joyful.
If you do this with your personal investments, you’re bound to gain confidence, learn a thing or two, make some money, and enjoy yourself.
So what are you waiting for? Open a free account with one of these personal trading platforms today — yes, even if your primary portfolio is managed you can do this too — raid your piggy bank for some monopoly money, and go have fun!
I’d love to hear your thoughts!