What should I invest in first?


#1

I’m new to actually investing, I just know a bit of terminology.

What kind of investments should I look into first?


Ask your beginners questions here 🐣
(Emma) #2

This blog might help


#3

Very informative, thanks!
Though, that post doesn’t actually tell me how to be a great stock investor, just how to be a sensible investor…


(Alex Sherwood) #4

We’ve got lots more blog posts where that came from :smile:

There’s a few more in this wiki that you might find useful Introductory wiki 🐣


#5

So you want to be a great stock investor? Awesome. That is a great goal to have. I’m glad you think that post is very informative. I’m also glad you got the idea, from reading that post, of how to be a sensible investor.
I didn’t write the post. I think being a sensible investor it’s a huge part of being a great stock investor. If you managed to get that far, I would say you’re on the right track.
As for your question about what kind of investments you should look into first, no one will be able to tell you I’m afraid. We can’t provide investment advice. What people can do is share and indicate resources so you can decide what works best for you.

Do you want to be able to pick stocks in order to try to beat the market or are you happy with a passive approach?

Historically, the SP500 provided real total returns of circa 7% per year on average.

I’m sure you recall from that blog post, the name of an investor. The author of the post called him legendary. His name is Warren Buffet. In his investment career he achieved circa 20% average annual returns.

Do you want to know how on earth did he do it? Awesome. You’re lucky. There are many books about his investment style. The man himself has been writing every year on the subject. There’s also videos where he explains his investment principles, and you can find them on YouTube. In those resources he also shares resources where he learnt from.

Do you think that’s too much for you to handle? Not a problem at all. You can always index. Indexing not good enough for you? I can see only two options then: you either hire a money manager with a great track record, and a reputation for, amongst others characteristics, being a sensible investor, or you can learn it yourself.

If you decide to learn it yourself you can start by visiting the links people are suggesting. You can also consider formal education in a business school so you may one day work in the field as a great professional.

Best of luck for your investment career Ben.


#6

Best of luck on the investing journey Ben!

Perhaps the point is that “sensible investing” is something that can be taught, and it has fairly predictable results. Invest enough for a long time in diversified low cost assets, and you’ll probably do well.

But “great investing”, if you mean something that results in better returns or does it quicker, is both harder to teach and has bad as well as good outcomes because the results are unpredictable. “All” you have to do is pick investments that will do better and avoid ones that won’t - the challenge is that that is very hard to do. As Raul says, Buffett can do this. But maybe most investors can’t!

Anyway, I started my investment jouney by reading Tim Hale’s Smarter Investing.


#7

:+1: I would recommend this book too.


#8

Thanks Rod.
I’ve never read that book. What’s is angle?


#9

My conclusion after reading that and a lot of other books and blogs was:

  • for various reasons it’s hard to have an investment “edge” on the rest of the market participants. (And probably much harder than your intuition tells you… after all you’re a clever person right). So investing by picking stocks or picking investment advisors might not be as successful as you hope, net of costs.
  • luckily there is a way to all but guarantee a good investment outcome, though the problem is that it’s a very boring way to invest: :roll_eyes: low cost index-tracking. More: https://mailchi.mp/a04c8a5d986b/fw6kwby692-213927

That’s pretty much what works for me.


#10

Sounds like it’s in line with John Bogle’s Common sense investing and others.

Thanks Rod


#11

By the way, indexing is mainly what I do.

But I truly admire the likes of Buffet, Lynch, Greenblatt, Templeton and many others I may not know.

I guess those guys are on par with Michael Jordan, Ronnie O’Sullivan, Ronaldo, Messi, Serena Williams… I don’t want to play against them. I want them on my team. I want to learn from them. Luckily enough, they write books and articles, they give lectures and concede interviews…


#12

I would go further and say that, on a long enough time line, no investor can. The successful ones are just experiencing a string of good luck. If you had enough monkeys making random stock picks, one of them would be as successful as the most successful retail investor.

You can’t become as good as Buffet, because Buffet isn’t just picking stocks like you or I can. He has enough money to buy up controlling interests in companies, to make them succeed. His reputation alone means others will invest in those companies as well, raising the price. You can’t do this. Buffet probably made most of his own money initially not by picking good stocks, but by taking the money of other people to pick stocks for them. You also can’t do this.

Another good book to read is “A random walk down Wall Street”. It shows how you can’t predict the future of the market from past behaviour (it acts, for practical purposes, randomly - don’t spend time looking at graphs!), and picking good stocks consistently is for practical purposes impossible, because no one can predict the future. Your best bet is to invest in everything (a world index).

To get back to @BenTen1010’s question, you can:

  1. Invest sensibly, and pick an index
  2. Gamble on something, and luckily come out ahead of the market
  3. Gamble on something, and unluckily come out behind the market.

3 is much more likely than 2. And 2 doesn’t make you a “great” stock investor. Just a lucky gambler.


(Ryan) #13

As a first investment an index fund is usually a good shout.

But I would say do some general reading/research into investing. Don’t rush anything, and don’t invest in anything you don’t understand - the stock market will be there tomorrow and the day after!


(Aris David) #14

If looking to invest in companies…

Look around your Kitchen, Bathroom or your Medicine cabinet. Look at the labels. Find out who the manufacturers are. Review their Income, Balance Sheet and Cash Flow statements. Are their dividends growing year on year?

Invest in what you know initially and learn.

Some examples:

Reckitt Benckiser - Durex, Neurofen, Dettol, Gaviscon
Unilever - Dove, Knorr, Rexona, Persil
Procter and Gamble - Head and Shoulders, Ariel, Downy, Tide
Heinz - Ketchup
PZ Cussons - Imperial Leather


(Emma) #16

Don’t think it’s necessary to go through the financial reports if you’re new to investing, seems like that would put lots of people off. ETFs are a great way to start and then build of your knowledge if you want. Same with trusts.
Doesn’t need to be that complicated unless you’re investing large sums of money or want to casually drop terms like ‘market capitalisation’ into conversations to impress your mates


#17

An infrequently-discussed benefit of this investing philosophy is that you stop worrying about your investments (because you’re happy to accept the market’s return) and you stop spending time and effort trying to predict the stock market (because you believe it’s random and opaque to you). Which frees up time for other things. :+1: