“Everyone you meet always asks if you have a career, are married or own a house as if life was some kind of grocery list. But no one ever asks you if you’re happy.”
—The Buddhist Investor
Dear investor,
As Benjamin Graham once said - “Successful investing is about managing risk, not avoiding it.”
“I don’t invest in stocks. I find investing too risky!”
This is a common statement I’ve heard from many of my friends, colleagues, and family members who are yet to start investing. They feel safer without investing in the stock market, and staying with the security of bonds, or even just having their money in their bank accounts.
It really amazes me when such intelligent people think that investing in the stock market is risky. But despite everything, they take much bigger risks by listening to their greedy financial advisors and losing their money on financial products that are never going to make them any profit.
The problem is not risk, the problem is volatility, and most people don’t know how to deal with it. Risk is the probability that an investment will result in a permanent or long-lasting loss of value whereas volatility is merely how rapidly or significantly an investment tends to change in price over a period of time.
What I tell them is that investing is risky, but just like many other things in life. With proper education and guidance, we can learn how to undertake “risky” things in life.
We live in a world where financial education is not a priority. Schools and parents rarely teach children how to treat money – how to save and how to invest. And that is what makes most people believe that “investing is risky.” It’s all due to a lack of financial education.
People are responsible for the programming they received in childhood. As adults, we are 100% responsible for fixing it.
Reality is different
The truth is – investing isn’t risky. It’s made out to be risky by many financial analysts, fund managers, financial advisors, and other stock market experts.
If they don’t make you believe that investing is risky, how will they ever be able to sell you their “expertise.” Of course, not all financial analysts, fund managers, or financial advisors are evil.
In the financial industry, you can find really good professionals who have exemplary work ethics and truly think about your financial goals. However, be aware of the “salespeople”, those professionals who only think about their own benefit and don’t care about your financial wealth.
The common perception amongst most individuals I have met over the years is that investing is way too risky and complex. Indeed, risk and complexity sell better and sound smart. If you invest in a supposed “risky” and “complex” financial product and you achieve a great return, people will think that you’re very smart.
One mental barrier that most of us suffer when it comes to investing is that we fear change. We’re terrified of anything that we don’t understand or something that requires hard work and deep understanding.
Most people have the dream of becoming rich one day. But ask them how they plan to do it, and the common answer is – “By working hard and earning money or by winning a lottery ticket.”
Hard work is an indispensable virtue. There is no substitute in life for work whereas winning a lottery ticket is a matter of pure luck. As an individual, you should focus only on the things you can control and hard work is one of these things. But, why not let your money also work hard for you?
You should see money as a tool to serve you. Money has the power to set you free, but also it can enslave you if you don’t understand it. The only way to set you free is by making money work hard for you.
One of the main enemies investors have is inflation. In other words, “the rising cost of living.” Your wealth growth should be faster than inflation, otherwise, you would be losing purchasing power.
Here you have a clear representation of what inflation means:
By putting your money to work, you could potentially overcome inflation and build real wealth.
Understanding risk
I’m not saying that investing is risk-free. Of course, it isn’t! But as mentioned by Warren Buffet “the main risk comes from not knowing what you’re doing.”
If you do not understand it, or if you aren’t properly educated on the risks involved, investing can be incredibly dangerous.
Just ask someone who lost a lot of money during the most famous stock market crashes like the 2001 dot-com bubble burst, the 2008 financial crisis, or the 2020 COVID-19 pandemic.
Like you would hire a piano teacher to learn how to play the piano, you must get yourself educated if you want to learn about investing.
The good news is that investing in education isn’t expensive at all. You don’t have to be a genius to become a successful investor.
You can learn from some of the best investing legends like Warren Buffett or Benjamin Graham, and their books or shareholders’ letters can help you in your investing development and preparation.
If you’re interested, here you have a link to Warren Buffett’s letters to shareholders from 1977 to 2020: Warren Buffett’s letters to shareholders
Also, we’re living in the era of unlimited information, which has changed the way we think, live, and work. The internet can provide you with a lot of worthwhile content and amazing investing educators for free.
My ultimate purpose is to do exactly that. Whether you are a small investor, a big one, or you are just new in the world of investing, my goal is to help you make your own intelligent and independent investment decisions.
By educating yourself in investing, you will know what you’re doing. And that will make a difference, taking away a lot of risk from your investment decisions.
Therefore, investing in stocks isn’t risky if you know what you’re doing. The biggest risk is not investing at all. To compound wealth, we must face inflation. If we don’t overcome it, wealth will just disappear over time.
To help me grow this amazing community and if you enjoyed this post, make sure to share it with anyone who could benefit from it.
Thank you for your support, and all the best in your journey to become a successful investor.
Yours truly,
The Buddhist Investor
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