The three-step plan to success

In today’s Exponential Investor…

  • Son of teachers
  • Three steps I think work for success
  • Take it on or pass it on

I recently had a conversation with a company CEO about what we do here at Southbank Investment Research and our publications like Exponential Investor.

I was explaining how we provide research, advice and ideas to people like you that we consider to be on the “edge of the bell curve”.

Also that we try to educate our readers with our experience, expertise and knowledge about markets, investing and the global financial landscape.

Over the weekend I got thinking more about that education side of things.

You see, I’ve always liked the idea of being a teacher, just not in the education system in the guise it exists today. My parents were both teachers. That has its ups and downs as a kid let me tell you!

And I doubt I’ll ever become a conventional teacher in that sense. Albeit I have nothing but pure respect for anyone who is a teacher.

Part of this desire to teach I think is to ensure that generations coming through have their eyes wide open as to what’s happening. I want to do my bit to help them and anyone that’s ready to learn about how they can get involved in markets to help set them up financially in life.

Which is why I want to go through today something less “investmenty” or market based and write about what I consider to be my three-step plan to being as good an investor.

It’s by no means a one-size-fits-all plan, but I think it’s pretty good. And it’s put me in good stead for my lifetime. It does have a tilt towards the younger generations.

So, hopefully you might take something away from it, or if not, pass it on to somewhere younger who might…

The three-step plan

I was fortunate enough to learn early on – as a ten-year-old – the importance of investing.

And by the time I kicked into my teenage years I was familiar with stocks, investing, dividends, company research all the things needed to be a good long-term investor.

I plan to impart that knowledge on my own kids, just as early, so they have the wherewithal to stand on their own two feet when it comes to investing when they’re ready to do it on their own.

But just because I learnt about investing, doesn’t mean I was some trust fund kid. I had a bit of a stash of shares. But I still had to work to run my car, to go out, to travel, to pay rent.

The value of the investments became a moot point. Sure it would have been fine and dandy with me had I stepped into adulthood with a million-dollar portfolio behind me.

But the reality is that it’s just not the case for most people.

That doesn’t mean you can’t be a rich investor by the time you do step into the adult world. But the key is to be rich in knowledge. The money comes later – so long as you don’t leave it too late.

Hence to be a good long-term investor, I think it takes a fine balancing act that I categorise into three stages.

Stage 1) Get rich in investment knowledge as early as you can

That means if you have kids or grandkids or a nephew or niece, take the time to sit with them, educate them about investing. Make it fun. Maybe build a little pretend portfolio to start with, or slip a bit of cash into an account for them and do it for real.

Give them the onus and responsibility for it. Do it together. Not only will you bond, but you’ll be setting them up with the life knowledge that you can’t put a price on.

Stage 2) Get rich in experience when the time is right

You could walk right out of high school into uni then get a job with a top-tier company and start earning right away. What this does is give you a narrow channel. The best thing you can do while you’re young, free and full of energy is to take in as much of the world as you can.

You will never understand global markets from the comfy confines of a computer. Unless you’ve got some real world “boots on the ground” experience in different cultures, different economies and different countries, you will never really be a great investor.

Nothing truly explains how the world works until you seen it first hand and comprehend the size, scale and organisation needed to keep global economies ticking over.

Experience the world young, travel as much as you can, while you can. It gets exponentially harder the older you get, until the lessons you should learn, are learnt too late.

Stage 3) When it’s time, earn, earn hard, invest smart and never stop

While you should always try to save a little as long as you can, you also need to ensure it’s not done at the expense of stage one and two. You will get to a point where you will be able to earn and earn well.

My take is if you’ve done enough of stage one and two, then your potential in stage three could also be greater as well. So that when it’s time to earn, work and really build your financial position, do it with full vigour and max power.

The knowledge and experience needed to do it smart, do it well, and commit to it long term will have been gained, and you’ll now be able to put your earning potential to maximum effect.

This I think gives you the best platform to really set yourself up for life and in the markets. It still gives you a crazy long-term runway, which also means you can get your risk/reward balances right.

Some of this may appear obvious. But maybe it’s not. Either way, it’s a hard world to figure out what you should be doing and when you should be doing it. Maybe this helps a little, or a lot. But as I said, it’s worked out pretty well for me, and hopefully for you or someone you know that has their whole life in front of them.

Regards,

Sam Volkering
Editor, Exponential Investor

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