She or he was in their second year at the university during the big market melt in 2008. Too many other areas to occupy their brain cells with school. The financial markets were not really part of their daily thoughts then; but they saw a few items on tv news.
They came from a family that helped them understand the hard work needed to both earn and keep a $ for investing here and there.
They worked hard at the university; continued to obtain a masters degree and today, have decent employment.
They are fortunate to have found a good employer with a wide open 401k program; brokerage feature and the whole package. This is a new world of consideration for them. They have never really studied or thought about investing.
I try to imagine what would be their question to this board or to any of us individually, to help them understand the how and why of the market place this year to date; and what in the heck is going on right now, and what are the prospects going forward to the end of the year. Their question would be a broadbased conceptual type of question; not really related to market sector investing, but to the leaning of how and why.
The two words of how and why should mean different items and be very critical for a new investor, as well as any of us.
The thought that returns to my mind was when writing a monthly blip in the mid-1980's for an investment club, and attempting to express investment thoughts, that for most of the members, was a foreign topic. A recurring thought during this process revolved around how would one explain chocolate ice cream to a person who lived in an area of the world, such that, they had no concept of "chocolate, ice or cream".
I ponder today, what an experienced investor could portray about the market place to a new investor. How could one answer a question that suggests that the financial market place appears to border on insanity?
Obvious helping guides would be to become a member here and a few selected readings.
A ten minute face to face converstation would likely express that investing is a learning process not unlike the hard work this young person put forth for their degree work. Investing is a special subject area with its own personality and aside from the mechanical parts of investing, they will also need a firm understanding of their emotional self. They will indeed need time for study.
A new investor today, whew !!! What a challenge.
Well, I'm tired from house destruction....err......remodeling; so I will depart this wandering topic.
Thank you for your time.
Take care of you and yours,
Catch
Comments
There is also this change in mutual funds towards a investing process rather than a fixed idea. The Strategic Latest Idea fund sounds more exciting than a standard growth fund. Mixing in hedges and other strategies seems to be the latest incarnation of funds as they compete against ETFs.
Then again, as government takes more and more money out of their pockets, there would be less to invest. They do live in interesting times
A couple Ben Graham-ism's come to mind... In the long run, the market is driven by earnings...and great companies have a way generating earnings over time, ultimately overcoming all the lousy things thrown their way.
And, despite all the craziness, great companies keep getting created in the USA. Easy to be cynical lately, but I suspect new investors will be able to find "satisfactory return" just like generations past.
My two cents.
Hey, you should post some pictures of the house destruction...err...remodel!
Hope all is well.
One needs to be careful about prescribing investment approaches because there are no doubt many successful ways to go about it. I like slow and steady. A favorite investment expression (source unknown - maybe Sam Zell?): "Your money continues working for you on weekends and while you are asleep."
I think for maybe 75-85% of us than, it boils down to a set of investments you literally can sleep with. Panic and pull-out at the wrong time or get greedy and pile in at the worst time and you're screwed. Worse yet ... a couple rounds like that and many will simply "hang it up" and stuff their savings into the equivalent of the proverbial mattress.
So, for the few who claim to have the formula for riches, be it health care funds, index funds, gold, emerging markets or whatever, I have little patience. Slow and steady, auto-pilot (with occasional pilot intervention), boring funds and diversification among funds and fund families is what I like. Mix it all up and let it run. Go fishing, hiking or indulge in writing long nonsensical prose at MFO:-)
You won't sport the best yearly gains on the board. But you will have something you can sleep with that will prove much more rewarding over the years and through the inevitable market ups and downs than simply stuffing cash away. And BTW Charles, loved the Ben Graham quotes - right on target.