Okay, I know I’m a little slow, but I just started watching the US TV series House of Cards. If you haven’t seen it yet, go see it. It is freakin’ badass, yo. Watching Kevin Spacey manipulate his way to political power in the U.S government is like watching a beautifully-crafted ballet (except that it involves white, middle-aged guys lying and betraying each other. Evil is beautiful.)
When my friends first told me about it, I was skeptical. I figured that there was no way I could understand a political drama, much less an American one. US politics is full of confusing terms, like majority whip and Senate and Congress. (I know, I know, I studied in the US for three years but never took the trouble to figure out these terms because I was busy trying to stay awake in Accounting 101.) But I decided to just heck it and give the first episode a try, and I never regretted it. Sure, the jargon was a little confusing at first, but I realised that I didn’t have to understand the intricacies of US government structure in order to appreciate the plot.
The Number One Frustration
I brought this up because I can totally relate it to how it felt when I first started learning investing. Last week, I wrote a post about what frustrates you the most about learning investing, and a BUNCH of you replied with some fascinating insights.
I love receiving emails like these because I always learn something new. For example, I previously assumed that the number one frustration of beginner investors is that they don’t know where to start. (For example, imagine going to Kinokuniya and feeling immediately overwhelmed by the purple sea of Rich Dad, Poor Dad books).
But the vast majority of you emailed me with a completely different reason about why you get frustrated. Check out the responses I got:
- “I’m amazed that it’s always so complicated. I don’t need to know all the fancy stuff.”
- “The most frustrating thing about investing is the amount of jargon/theories required to understand it.”
- “Coming from a non-financial background, these are totally Greek to me!”
- “It’s the technical jargon in investment books. I fell asleep reading them…”
From what I’m hearing from you, one of the biggest problems with learning investing is that it’s loaded with complicated, jargon-filled, technical explanations.
First of all, I love this. You see, most people out there would prefer to sit around complaining about the government instead of opening up an investment book. People like these make me want to commit suicide with a plastic fork.
But we’re different. We actually bothered to take that first step and at least tried to read an investing book. Sure, we got frustrated by how complicated and jargony-y the information is, but at least we took that first step. So give yourself a high-five!
Okay, We Confess
Yes, in most cases, personal finance bloggers and authors (including myself) can do a better job at explaining things in a non-jargony way. Some of us probably don’t even realise that we’re speaking Greek to most people!
I subscribe to about 10 different personal finance blogs, and about 80% of them are filled with material like “Understanding the co-deductible in Medisave Life” or “The inner workings of a CDP transaction.” It’s as if they assume their readers wake up in the morning and go, “YES! I have an overwhelming urge to ponder the difference between CPFIS and SRS accounts today!”
As fun as it is, sitting around making fun of personal finance bloggers isn’t going to improve our wealth. If we want a shot at investing, we’re going to have to figure out how to work our way through this learning process. Sure, it might get a little uncomfortable and dry along the way, but remember this: If we get this right, we can reap the benefits for the rest of our lives.
With that, here’s how to work through the jargon as painlessly as possible.
Start With the Strategy
If you’re learning investing for the first time, don’t start off with an article like: “Here are the five different types of investments. When you buy a stock, you buy a partial ownership of… zzzzzzzz” or “Full-service brokerages provide a wide range of…. (SNORE)”
Stocks, bonds, mutual funds, ETFs, brokerage accounts, commodities, etc are all TOOLS of investing. But at this point, we don’t need a description of the tools, we need to figure out how to USE them.
Would it be useful to learn about them at some point? Yes. Do you have to know their definitions now? No. From now on, I give you permission to NOT understand all the terms you read. Really, it’s ok.
Remember that you’re learning investing to grow your wealth, not study for an exam.
Instead, I’d encourage you to take a step back and read books and articles about investing strategy instead.
For example, while watching House of Cards, I didn’t pay very much attention to the terms I didn’t understand. Instead, I focused on the main plot of the show: how Kevin Spacey’s character deviously rose to power by backstabbing everyone in the back. (ooh, fun!) If House of Cards had started off with a lengthy description of what Senate, Congress and Secretary of State were, I would have fallen asleep.
In short, look for books or articles that talk about the strategy first. Once you know the strategy, it becomes a lot easier to understand the jargon and terms surrounding it.
Pick the Simplest One
“But Lionel, there are a thousand strategies out there. Which one should I start off with?”
When I was in college, I had friends who wore suits and ties and cardigans all the time. They were obsessed about getting a job, and spent all their time going for mock interviews, case studies, and presentations. When we met several years later, those same friends lamented at how they wish they’d spent more time having fun in college instead of trying to grow up so fast.
In the same way, don’t try to “grow up” too fast when it comes to investing. Most beginners dive straight into hardcore analysis of annual reports and technical indicators, when they haven’t even covered the basics!
The more basic the strategy, the less jargon you’ll have to deal with. Therefore, start off with a simple strategy like index investing. Partly, it’s because I personally think that it’s the best strategy for 90% of investors, including myself. But more importantly, it’s so simple that anyone can understand it.
You can Google articles on index investing, but nothing beats reading a good, solid book. Here are three that I recommend:
- The Little Book of Common Sense Investing by John Bogle
- Millionaire Teacher by Andrew Hallam
- Smarter Investing by Tim Hale
I like these books because I think they’re not too complicated or too simple, but just right for the beginner who doesn’t want to be pandered with 50 pages of fluff. Btw, If you know a little bit about index investing and want to know how you can actually implement it in Singapore, my book is a great place to start 😉
I’m not saying that they’ll help let you completely understand The Meaning Of Life – they might get a little dry or boring at some point – but work through it. The people who get rich are those who figure out how to overcome obstacles, not those who give up at the first sign of resistance.
Remember what we said at the beginning: If we get this right, we can reap the benefits for the rest of our lives. In six months, you can either still be frustrated that you can’t “figure this investing stuff out”, or you can be happily invested and watching House of Cards. Ultimately, it’s your choice.
Agree/disagree with my approach to learning investing? Let me know in the comments below.
P.S: Like I said last week, I’m working on my guide for beginner investors. Please be patient while I read your comments and narrow down the scope of it. Till next time!