Straightforward Money Investing Guide for the Confused Beginner

Have you ever felt overwhelmed by the amount of information available on investing? I certainly have. It's like being lost in a maze with countless paths, each one leading to potential financial ruin. But what if I told you that investing doesn't have to be so complicated? In fact, it's surprisingly simple. This article is a condensed guide that could have saved me a lot of pain when I first started investing. Don't let the maze of investing confuse you - these tips will guide you through the labyrinth and help you make informed decisions.

DISCLAIMER :  The information provided in this article is based on my personal experience and research. However, I am not a financial professional and the advice given should be taken as general guidance, not as individualized financial advice. You need to reach the conclusions I present yourself (or informed contrary opinions) for them to become truly valuable.

The idea of investing can be daunting, I get it. But the truth is, it's actually quite straightforward - though it does require some work on your part.

1. Create an emergency fund, meaning around 3 months of living expenses in a savings account
2. Open an account in which you'll start investing :  TFSA (for Canadians, CELI in French) or 401K (Americans)
3. Buy your first asset : 1 single of Vanguard SNP 500 stock (for Canadians ) or SNP 500 stock (for Americans)

Congrats. You did it. Now keep buying, and don’t sell. It sounds too simple? It IS that simple, and that’s what makes it so HARD.

Note : We could always nitpick :

• Is 3 months too much / not enough for an emergency fund?
• Can’t I have a higher ROI (return on investment) by manually buying the underlying stocks of an index fund?
• But in X situation, wouldn’t be better to put my money in Y type of account?
• Why not the Z index fund instead? Why not stocks, or crypto, or….

Investing is simple, because nitpicking is mostly pointless. Why?

Because the most sensible strategy for almost every single person is investing for the LONG TERM in INDEX FUNDS. This method beats pretty much anything else you could do. Not trading, not stock picking, just plain old index funds. If you don't know what all those terms mean, don't fret!  

What drives results is here is TIME IN THE MARKET. Meaning, your first enemy is whatever prevents you to let your investments sit there for a long time.

Your bottleneck is PSYCHOLOGICAL, not TECHNICAL (we’ll see more of it later.)

The best investors are not math geniuses, they’re just very good at not screwing up.  The less errors you do, the better your results will be.

Some qualities like consistency, patience, cool-headedness and keen judgment are much more important than technical know-how.

Here it is, the incredible (and non-exhaustive)…

Very straightforward guide to SCREW UP SO HARD YOU WANT TO CRY

A ) SELLING TOO FAST

Why is it the problem? :  If you want to make money investing you can....

• 1. Gamble in the short term, or 2. Buy and hold in the long term.
• The money you invest grows exponentially. The goal is to let it sit here for a LONG time. It means that in 1. in the short run, nothing will seem to happen and 2. at some point it will snowball.
• Examples :

1.   Sell your stocks too fast, because you need money NOW.

• How to prevent it?:  Make an emergency fund. In a pinch,  use that money instead of your stocks.

2. Sell your stocks, because you’re afraid of losing money

• How to prevent it?:  -  Reverse the situation : if your investments are down 20%, then it's a great discount! Buy more before it goes up again!
• Remember how many "end of the world" periods the financial world has already been through! We're just out of one with COVID by the way (hopefully it won't happen again, right Credit Suisse?)
• It doesn't mean it will ALWAYS be true that the market will ALWAYS go up, but if you're investing in the first place, you should believe that.
• You want to be making decisions when you're at in your most rational state, not in full panic. Write down your investing rules clearly to know exactly when you would allow yourself to sell.

B) BUYING THE WRONG THING

It means buying crypto or “real estate” in the Metaverse, without being able to explain to what it is to your mom.

• Why is it a problem? : Not understanding an asset means you’re gambling, not investing. Investing means knowing the risks and formulating a strategy, not copying influencers or a certain popular subreddit.

Falling for a scam

• It seems obvious that you don't WANT to fall into a scam, but there's a lot of them in the investing space

Day trading

• Please, just assume day trading is rubbish. If you want to dig around and discover it by yourself, no problem mate. But if you feel compelled, you can learn more about what it is and about it's risks here.

C) NOT INVESTING ENOUGH / CONSISTENTLY

• Why is it a problem? : If you make a 8% return on 10$, that's 80 cents.
• What if, because you only but 1 time per year, you buy index funds at the worst time?
• Investing consistently helps diminish your risks without affecting your returns. What if you buy It's called cost averaging
• By making investing a habit like brushing your teeth, you also lower the chances of stopping investing. Quitting out of discouragement might cost you much more in the long run than a few bad decisions.
• You can even automate a part of it, by putting a % of your income directly into an investment account.

D) OUTSOURCE THE MANAGEMENT OF YOUR INVESTMENTS TO A “PROFESSIONAL”

• Why is it a problem? : Even though professionals can help you formulate a plan and push you in the right direction, a self-motivated individual doesn't need them to manage their investments.
• Remember :  we're talking about index funds. We buy the whole market. You don't need someone to manage you index funds and take a percentage of your earnings, because there is nothing to manage.

Investing probably won't make you rich, unless you stay in the game for a LONG time, but it can be done. Investing is also a great way to maintain wealth that you've already acquired and transform it into an income stream.

Investing is a psychological battle against yourself . To win, you need to know how you can fall short and take measures to prevent errors.

Again : this article is merely an introduction and doesn't replace understanding concepts for yourself.

If you're new to the space and want to learn more about investing, here are some ressources that have helped me :

1. Psychology of Money, by Morgan Housel. Read it over and over.
2. Plain Bagel
3. Canadian in a T-Shirt, especially if you're, well...Canadian
4. Investopedia is also helpful