Investing — The good and The bad
I remember, I was starting out as a wanna be investor with zero cash. But with a lot of self confidence and certainty that next year I will be featured on CNN as the new billionaire, I had a very clear idea about who is an investor. I probably read some book about Wall Street, or watched the Wall Street movie. An investor is somebody who trades on the New York Stock exchange and does not do stupid stuff — like buying the stock that is about to fall.
So for anybody starting out there there are several ways to make money — several personas you can become — and only some of them count as investing. There is nothing wrong with any of them, but each one feels very different and is would make different kinds of a people happier than others.
To start — you can be a highly payed employee, you can work really hard in your job, become a highly paid and make a lot of money. For this you have to learn a lot, and spend a lot of your time in your work. Many people call this ‘investing’ in yourself. And it kind of is, but I would not call you an investor, though this path is probably the safest.
Then you can start your business, work your ass off, and either live off what the business is making or sell the business. Again, you kind of invest your time and potentially money into this business. Mostly you are a business man, a CEO, the owner. Your key decisions are about what people should do, more that which assets to buy with your money. Maybe one day, when your company is really big and probably owns a couple of subsidiaries, you start thinking more about allocation of capital in your enterprise, rather than particular details about the company, but even some CEOs of big companies are not at this stage.
The most discussed investors are people who buy something very cheap (like Netflix in 2010) and watch the value go up until you sell. This is the investing from hollywood movies. It is very sexy. It looks easy. And it is, actually, a speculation. Mostly, this is very risky. If somebody starts speculating with purchasing e.g. stock, too many people will find themselves loosing money. Even though their ideas looked really amazing at start.
For the people who want to grow their money as safely as possible there are some approaches to investing. I see them as two main threads — value investing and portfolio investing.
Both have some substance. But as I understand it, it takes quite a lot of time to get rich with portfolio investing (unless you use some futures or some other derivatives probably).
Portfolio investing is good in one important sense. If done well it may not require a lot of attention. There are many people promoting passive portfolio methods.
Value investing is active, and can get you to your financial goals faster.
For this blog, I will mostly talk somewhere between value investing and value investing, trying to take as little risk as value investing and searching for opportunities for gains that speculation can provide.
You only need a few such good opportunities to become financially well off.
So let’s start on this journey.
