3 Analogies to Help You Start Investing
Give rationality to your money.
I am 27 and I have been investing a major chunk of my income for the last 3 years now. I understood the importance of investing quite early in my life and I’m glad I started. It’s is a skill that anyone can acquire.
It can be intimidating at first because you will be bombarded with a lot of information. I am not an investor by profession but I always treat myself as one, a huge psychological tool.
Here I have shared 3 analogies that I consistently use:
Analogy 1: Extractive institutions
Russia experienced a huge economic growth under extractive institutions model for almost 5 decades. The growth came to a halt eventually since the incentives were so poorly organized. No motivation, no productivity thus no innovation.
Usage: Investing requires patience, a lot of patience. I fabricated a long term mindset when I started to invest since I am not looking for a short explosive growth. It’s more important in investing than any other field to allocate your resources(money and time) wisely. I invest 55% of my monthly income with the majority being in low-cost index funds. Don’t treat investing as just another paragraph to add in your “My 5 Passive Income Streams blog”.
Analogy 2: The aftermath of “The Arab Spring”
Arab Spring started with the right intention though consequences were out of anyone’s imagination.
Usage: Investing requires a lot of reading, a lot (specifically if you are picking stocks by yourself). I allocate 2–2.5 hrs in the day to read and do analysis and I always start with output in my mind. If I decide to go through balance sheets, I would just go through BS’s only. If not followed, things will go haywire and you will end up highly overwhelmed.
Analogy 3: Follow Jacobi
German Mathematician, Carl Gustav Jacob Jacobi said “Inverse, always Inverse”. Look at all problems in inverse and they start to look a bit easy.
Usage: I always think “what does bad investing looks like” and I always end with 2 answers — “not UNDERSTANDING the risk” and “understanding that you understand risk, but you don’t”. Investing results lie far in the future therefore impulsive decisions don’t meet their fate at an instant. So I avoid investing even a dime in something I truly don’t understand.
Many people start investing in their late 40’s and that’s why more than 70% people end up with way less at their retirement.
