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What happens if you just read books, play games or pursue important vocations, and whilst living life so fully, you also simply ignore money completely - you simply imagine that it doesn't exist.

What will will happen is that the bills will pile up, and you won't be able to pay them. Think of this as there being a constant negative cash-flow in your life, unless you are working. If you sit still, the cash savings that you have decreases slightly each day.

How can this be overcome? If you own a small share of a business, then it is possible to not be involved with the business at all, but when you repeat the above exercise, the business will continually pay a small dividend to you. So as you sit still, there is now some small positive cash flow each day from the business (even if it pays out only every 3 months).

What happens if this dividend is as large as the negative cash flow that we talked about in the second paragraph? In this case, you can continue to do what you want and you won't have to think about work, other than your vocations which you are likely far more important (not only for you, but possibly even to culture or society).

Now, sadly, it isn't that easy to own a business large enough to pay your expenses. But what I am trying to illustrate is that you always have a constant negative cash flow from life and a positive cash flow from investing, and if you can build your ownership of business large enough, the positive cash flow can at some point catch up to, and then exceed, the negative cash flows.

What you will hear all the time is that investing involves taking on some level of risk. You will hear that there is no guarantee of a return on your investment, and there is luck involved, or you had to get in at the right time and have missed all the past opportunities.

Thankfully this is not necessarily the case, or rather it is misframed. Much of these discussions relate to the changing quotation of investments, which indeed is all over the place - think of the quote as changing randomly each year - but over the long-term, particularly if you own a basket of businesses with a low-cost index fund, you will receive an average 30-year return in the range of 4% to 8% above inflation. You can build your business ownership starting at any time; even if some entry periods will offer a higher return, all entry periods will provide some return in the form of dividends over the very long-term.

How do you build up this business ownership? You start with a discount broker (just Google this term and you'll have dozens of them throwing their arms up trying to get your business). You set up your account, send some cash to your account, and purchase shares of the business that you would like to own, or shares of an index fund. Your cash disappears at this point - try to not pay attention to the changing quotes, but think of what you own now as the business itself - it takes many years for business to produce cash and grow, so try to get away from the idea that there is this quote moving up and down each day. Forget it - you don't have the cash anymore, and instead have a permanent share of the business.

Some business will offer a higher investment return over the long-term than others. The advantages of various business purchases, and index funds, are discussed throughout Shrewd'm. A good place to start is the Berkshire Hathaway board - the community is exceptionally helpful and friendly here, so definitely do not be afraid to ask the most simple questions. Actually, as a rule of thumb, the more stupid, the better.

Many investors believe that the market is inefficient, and that by focusing on a company's fundamentals, such as earnings, cash flow, and assets, they can identify stocks that are selling for less than they're worth. Other investors believe the market is efficient, so it doesn't matter which business you buy - they'll all have about the same return, with the higher returns requiring wilder fluctuations in the quote over the short-term. This distinction can be bypassed completely by simply buying an index fund, such as S&P500, or the equal-weight index fund RSP which over the past 100-years gave a return 1% to 2% higher than the S&P00.

The single concept that nearly all enthusiastic investors learn very early on is the effect of compounding. You basically either become excited by the idea, or you don't, and there is something to be said for this being the filter as to who will become an investor and who won't. Here's the test - if the idea excites you, there is a good chance you are already an investor at heart. Imagine adding up your savings of (let's say) $1,000 per year. Pick up a calculator, or load a graphical one, and type 1,000 + = = = and repeat = many times. You'll see how your savings builds up each year. Now do something similar. Type 1000 * 1.08 = = = = and again repeat =. That is your savings with an average 8% gain each year. Rather soon, the figures start to ballon past the earlier calculation. And guess what - in the first example you committed $1,000 every year, and in the second example you committed $1,000 only in the first year. The effect balloons much more if you continue adding savings to your investing. This demonstrates how capital compounding (from investing) will always exceed linear savings (from work) if enough years can pass. This is also why it is extremely advantageous to start early with investing.

Nearly all of the discussions about investing are about what tricks to apply to get a better performance than everyone else. That's the nature of the human competitive spirit. However, it is important to not miss the big picture: It is the participation of investing over the long-term, and merely accessing an average return, which distinguishes most successful investors from the unsuccessful ones. Many investors enter and leave the market at various times, and their average time in the market can be only a portion of their life - not enough time for the savings to really compound.

Investing requires the avoidance of costs (just like running any business), and above all, it requires extraordinary patience. It does require discipline, but not the type you might think - it doesn't require hard work, so much as a mental discipline connected with patience and indifference to both the depressed mood of markets and the euphoric moods. It is these mood changes, and changes in the news sentiment, that causes investors to enter the market when the prospective return is low (the quotes high), and exit the market when the prospective return is high (the quotes low).

This board is a place in Shrewd'm where no question relating to investing, not matter how basic, is off limits.If you are new to investing, you have come to the right place.

Welcome to the exciting world of capital compounding, the reading of accounting, the pragmatic understanding of various types of business, a fascinating life-long study of psychological biases and other philosophical readings, and most importantly, welcome to a world where you will forever seek to nurture your greatest treasure - your invaluable curiosity.

Shrewd on.

- Manlobbi

Manlobbi,

Sentence by sentence, paragraph by paragraph, I disagree with nearly everything you said about how beginners should think about investing.

"Well", you might say, "isn't that a surprise?" To which the only (proper) respsonse is "Humans are unique, and they differ widely from each other in their means, needs, goals, interests, and opportunities", so much so, there can be no one best way to do any of this investing/trading stuff".

Let me substantiate that (albeit anecdotally) by saying that I was one of four kids in a blue-collar family whose parents modeled investing for their kids. E.g., for birthdays, we were given stock shares, not toys, and shown how to track them in the local newspaper, and all of us were helped to open passbook savings accounts as soon as we could write our name, as well as have our own library card, the other rite of passage in my family.

So if there were ever a favorable set of circumstances in which to learn "investing", they provided it. But I'm the only one who caught the bug. As my siblings grew up, they wanted nothing to do with investing. But two of them still ended up OK, having houses, spouses, degrees, pensions, etc. (The one odd-ball turned hippie and died single and poor at 60.)

I raised four kids, only one of whom has ever done more than dump part of their paycheck into a 401K and hope for the best. The others wanted nothing to do with money management. Two have ended up with houses, spouses, degrees, houses in CA neighborhoods the rest of the nation is aghast at their high price, and the usual trapping of the very upper middle class (in contrast to their proudly working-class dad who loves his humble Portland cottage). Again, there was one odd-ball/hippie, a lost soul, living paycheck to paycheck or on charity.

So, clearly the lesson that might be drawn from this is that "investing" isn't for everyone, nor is it even very necessary. It's just a life-style choice like cycling, rock-climbing, or a dozen other things one could do in which there's always a degree of risk and can always offer satisfaction for its own sake for having executed well.

My one kid who did invest for while? We'll kick ideas back and forth, but we agree on almost nothing about how to deal with markets, and she's someone whom you'd never want to be on the opposite side of a trade with. Just ruthless, and she's gone as much as three months without a losing trade, because she's totally aware of who she is and sticks with her plan without wavering. She buys at her price, or she doesn't do the trade, and she sells at her price, or she doesn't do the trade. This is also a gal who's hiked the AT, the PCT, the Camino, run a marathon in Antarctica, and is a Gulf War vet. But trading wasn't really ever a part of of her essential identity, and gardening has since replaced it.

Me, OTOH, is someone who keeps NY hours so I can stay with markets and whose bookshelves are floor to ceiling with econ books, finance books, investing books, trading books, books on gambling theory, chaos theory, securities analysis, financial modeling, etc. In short, as I like to joke, "I don't have a life. I've got a portfolio". But I'm also someone who remembers the long, long, long years of my apprenticeship, and I can't help but think there are easier, more interesting ways to pitch "investing" to them who don't do it than are currently offered (which I'll broach in subsequent posts).

Charlie

<<I can't help but think there are easier, more interesting ways to pitch "investing" to them who don't do it than are currently offered (which I'll broach in subsequent posts).>>

You are really a naturally good writer and along with your experience with children I'm really sure you could inspire a lot of people in getting started.

I agree with all your words so I found it strange that your stance was disagreeable at the opening. It's fine though. Don't think anything of it.

What would be ideal is that those without any investing knowledge can feel *comfortable* to post here.

One may be unlikely to turn people's natural inclination of no investing interest towards enthusiasm. We concurred.

This is just my personal taste but I also don't even think there is anything inherently or especially noble or necessary culturally valuable about investing all. I'm rather neutral about it, but in any case for those that are instinctively interested, starting early and having some support around them is a huge advantage.

In practice the board might be for those that are already interested in investing, but want to know simple things like choosing a broker, dealing with taxes, W8BEN forms for those not in the US and so on; whatever is actually asked!

The first and most important step that I'm certain about is, ahead of writing initial posts, to invite such inexperienced investors here so they are asking the questions. I would send a link of the board https://www.shrewdm.com/MB?bid=112 and apply most of the valuable introductory writing for those specific souls you are wanting to help.

One could just answer questions occasionally and it would be possibly the more valuable use of words here!

If there are not many *questions* after several years, the board can always be removed.

I'm not doing any paid promotion so relying on the community itself to send urls to anyone wanting to get started with investing. That why I'm understandably underlining this initial action.

So to address the audience itself, everyone is welcome to ask any question about any step, including what you think are the dumbest questions, related to investing. Everyone has to start from somewhere.

- Manlobbi

Manlobbi,

You're not trying to sell anything, nor I. You're just a guy who loves to invest and who hopes others share your passion, and you've taken upon yourself the work of creating a forum where that might happen. Kudos. Now come some realities, and to make things a bit less personal, let me switch the topic from learning to invest to learning to build a boat, because the same sorts of numbers prevail.

Over the years, as I've put in on a lake with one of my wooden prams, or even when the boat was on the roof racks and I'd pull in to a gas station, people would wander over and always ask the same question, "Did you build yourself?" It's beautiful. I wish I could do that."

I'd always take the time to explain how easy the process was, how little the materials cost, and I'd point them toward sources where they could learn more. The more ambitious would take photos, and I've even given some my home phone number. Over the years, at docks, in parking lots, and on the water, I've made my pitch to maybe a hundred people, but not a one has followed up. Not a one, and many of these people were fellow fishermen who wanted/needed exactly the boat they were seeing: a one-person, light-weight, car-toppable, beach-launchable, easily-rowed boat that could be put on the water --complete-- for $150.

Same-same with trying to get people to help themselves get ahead by learning a bit about managing their money better or learning how to make their money work as hard for them as they had to work to earn that money in the first place. There's always genuine interest when I make my pitch to family, friends, co-workers, or anyone who'll listen. I don't think they're just being nice. They really would like to learn. But almost never is there any follow-up. I don't know why. But that really is the case, and I suspect that will always be the case, because that's exactly where Wall Street and the financial planners and the financial newsletter writers want things to be. They don't want there to be a well-informed, self-directed, investing public who doesn't need their "services".

Right now, for reasons we could argue about, America --and the world-- is in a recession that's only going to get worse. But the governmental and public reactions have mostly been denial and increased credit expansion, not retrenchment and reassessment. You've heard the numbers. A huge number of American don't even have $400 savings and if faced with an emergency, wouldn't have the cash needed to solve the problem. The numbers for them close to retirement are just as bad, and old-age poverty is going to increase in this country as costs continue to rise. As you know, none of that has to be. But it is going to be if the usual pitches are made about "the need to accumulate early, so later distributions can be made later".

I don't remember the proper economic term. Something about 'time-preference'. But if that's the audience we're dealing with and if their time-preference is short-term, then that's the playing field we have. Fortunately, there's some gimmicks we could use which I'll detail in another post.

Charlie

I'm afraid that if you intend to leave a lot of posts it may run the risk (only on this board) of not speaking to the audience, because - the audience isn't here.

So the first goal, I repeat, is to wait for questions to appear by investor beginners, or more importantly to send the board url to anyone you know who is already wanting to get started but needs practical assistent, so then the audience will exist only after that as the starting point.

When I wrote 'paid promotion' I was talking really about running Google ads to invite people here as TMF would have done. Because we don't have that, the only avenue is for the community to invite people they know. And they have no obligation to, but that is the only possibility I know about to bring new investors to this board.

The opportunity to have this board function is immediately in front, but it will not come from posting no matter how perfect the post is, but from inviting beginners and then answering their questions.

- Manlobbi

Manlobbi,

It's your website to manage as you please. You think that gaining web traffic depends on inviting people, one by one. But I'm a believer in "If you build it, they will come." Also, I really don't care who reads my posts or not. Mostly, I write for myself, because writing is my way of working out my ideas. I figure that if I can explain it to someone else, be they present or not, I can explain it to me.

For sure, at TMF, over the years and under different handles, I've done thousands of posts, nearly every one of which is throw-away material for having no more permanence than footprints in the sands along a shoreline that the winds will soon obscure and the waves will wash away. Occasionally, my reply to a question will be thanked. But for for the most part, the questioner departs the conversation without further comment. So, who benefited from the exchange, him, or me, or both of us in ways neither of us will ever know?

That's the part that requires faith and a belief in karma. If one has ever been helped by someone in the past, it becomes an obligation to pay forward by trying to help others. So I post, because the path I walk, though likely not the same anyone else will ever travel, might have a few less obstacles for someone who does wander onto it than if I hadn't stopped for a while to comment on my journey.

"Faith", says the sheik in the movie, 'Salmon Fishing in the Yemen', to the fisheries biologist when he expresses doubt that the hatchery fish will run like native ones would. "You've got to have faith."

Charlie

Somewhat different from Charlie, I believe that there are certain areas in which my children must take instruction. They will learn to read, they will achieve a certain literacy in music, etc., and they will learn more than a basic financial competency. Of course, as adults they can do whatever they want.

From birth, my three children had UTMA accounts to which I and their grandparents contributed annually. I managed the investments in these accounts.
By age 18, each had over $600,000 in their accounts. In addition, they all started Roth IRAs as teenagers which they manage (although they can always run ideas by me).
They paid for their college tuition and expenses from their UTMAs with the understanding that whatever they don't spend will be their money.
It is remarkable how motivating that was for them to voluntarily rein in expenses, choose a non-frivolous major, and to graduate early or on-time. The money became theirs to control at age 21. They were told that they could let me continue to manage the accounts and I would review/discuss all decisions with them, and they would discuss all withdrawals with me - or - they could move the money and change account passwords. If they chose the latter, it would mark the end of further parental and grandparent funding.
They understand the goal is for them to continue to learn and to takeover when they are in their 30's.

Their relatively smaller Roth IRAs have allowed them to speculate, take risks, learn things the hard way, and to also have some remarkable successes.

The UTMA approach was a bit of a gamble, an early bet that we would raise mature and responsible children.

I will let them know about this board so they can ask opinions from someone other than their Dad.

Smufty

I've been interested in investing almost as long as I've enjoyed sports. I think the progression went the comics section, then sports and finally the financial page. Maybe because I'm a numbers person or maybe because my uncle always did his own investing and once won some stock picking contest held by the local newspaper (his main job had nothing to do with the financial field).

If someone isn't interested in financial stuff I don't think it is too wise to force feed them. Answer questions and once in a while if you see something not smart make a gentle comment and then leave it alone. I know from experience that kids will often quickly go the opposite direction if they feel pressured to do something.

I see too many parents (I've never been a parent) who try to do too many things for their kids, even those working full time in their 20s.

Personally I think if a kid has 6 figures in an account when they are young, the vast majority will blow through that. I was always fiercely independent and my goals at a (too) young age was to get through college in 4 years and get my own job so I didn't have to rely on others. Fortunately I did that and until my father recently passed away, the only money I ever received post college was a small inheritance when my one grandmother passed away in my 40s.

On the other hand one of my uncle's long time friends does everything for his kids and I don't really see them being particularly responsible or grateful. He has purchased all of them homes and in some cases still pay the utilities. I think he is trying to help them out but I think a bit too much.

And people are just different. I've never had a budget but always had an idea of when I was spending too much and would cut back. I know others who just spend anything that is in the bank account. Kind of like some people can work in commission based fields where income can vary greatly and others can't.

I do think it is bad that financial info is rarely taught in school. I want to say the only time I can recall having anything to do with finances would have been in college.

Many investors believe that the market is inefficient, and that by focusing on a company's fundamentals, such as earnings, cash flow, and assets, they can identify stocks that are selling for less than they're worth. Other investors believe the market is efficient, so it doesn't matter which business you buy

dillbeans thinks the market is probably a little inefficient, and to the extent that it is, dillbeans is probably on the butt end of it. An inefficient market isn't just opportunity: it's also peril. Years of investing experience have taught me some lessons: The most important one is that my investing goals should be guided by my financial needs and not by my desire to be above average.

cheers,
db

Agree with your words. The market inefficiency corresponds to wilder changes in sentiment than the objectively changing business conditions, and this causes people to exit (or even simply genuinely require disproportionately more cash at the time) during the lows, and become overconfident and increase exposure (or borrow more) at the highs.

- Manlobbi

I just read these opening comments to this "Welcome!" subject. How beautiful they are because they cover the yin and the yang of things. The, "let them ask, first" and the, "build it and they will come." They are both one.

My first post was a question, posted Feb 9, 2023, subject: Money Fund Newbie. Without this board, though, I'd have no place to ask it. Thank you, Manlobbi. Then, there was Charlie, offering wisdom. Thank you, Charlie.

They both work, I think, because of the intent, the good will and generosity.

Thank you both, and others.

I read the welcome, again, and realized i can ask more questions!
Thanks, again.

Elizabeth

Dear Manlobbi,

Thanks for this opening letter. I just sent it to a friend.

I should append to my name, Beginner: Slow Learner.

:)

Thanks for everything you do.

Best wishes,

Elizabeth

Dear Manlobbi,
Thanks for this opening letter. I just sent it to a friend.
I should append to my name, Beginner: Slow Learner.
:)
Thanks for everything you do.

Thank you kindly for your generous posts. The atmosphere at Shrewd'm is better with your presence, deep curiosity, humility and kindness.

- Manlobbi

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