General Advice Warning. The information on Dad Mode is intended to be general in nature and is not personal financial or product advice.
When I talk about investing, the eyes of the poor soul I’ve cornered start to glaze over within the first few seconds of the conversation. They usually start to edge away, looking at their watch and wondering when this nerd is going to shut up about compound interest.
I get halfway through my rant and then say “You know It would be nice if you just humour me, I am your husband after all”.
This doesn’t really bother me, as I will talk to a brick wall about investing if I have to, I love it that much (I’m not comparing my wife to a brick wall… or am I?). God forbid, someone asks me, “what should I invest in, stocks?”. Then the flood gate really opens.
Good thing this website can’t call me “boring” or “obsessed”, its enjoyable to finally have an outlet for my incessant ramblings.
Seeing as though you’re voluntarily here (sucker), I might as well chew your ear.
In this post, I want to start at the beginning and go over some solid reasons you should be investing in stocks, and then go into some basic principles to keep in mind when you’re thinking about diving in.
But first! A disclaimer…
It goes without saying, but I’ll say it anyway. This is not financial advice, it is for entertainment purposes only and doesn’t consider your personal situation. I’m not a financial professional, and I’m still working all of this out, so If you have any ideas or think I have it wrong, let me know!
Why you should be investing
Investing and long-term money management, at first glance, doesn’t seem like a big part of being a dad, but dive a little deeper, and you’ll find that it’s an essential part of raising kids.
When I was a kid, my parents had regular arguments about money. There either wasn’t enough of it or they didn’t know where it would come from next. Although we always had what we needed, it would have been nice to avoid experiencing that conflict.
Love it or hate it, money is an essential part of life and if we can make some good decisions early, you can set your family up for a great life.
Why should I Invest in Stocks?
1. To give your kids a great head start.
Investing, in my view, is a long game that only gets better with time. When your kids are young, they can take full advantage of the power of compounding (here we go with the compounding). They might not appreciate it now, but when they are old enough to understand, they will love you for it.
2. To build a supplementary income.
When thinking about investing, it pays to see every dollar spent as a dollar buying yourself income. Shares or stocks are bite sized pieces of companies that often pay out income throughout the year. These ‘Dividends’ can be reinvested to buy more shares (compounding), or you can use this money to supplement your normal income.
3. To keep up with inflation.
If you have money in a savings account currently (2022), that cash is loosing value every day. The interest rates are so low and inflation so high that it’s pointless to have excess cash in the back. You might as well put cash under your mattress and burn some of it every day. Historically, money invested in the stock market has grown at a rate that outpaces inflation, so at the very least you can keep up.
4. To teach your kids about money!
They sure as hell aren’t going to learn about it at school, so it’s up to you to teach your kids about money and how to grow it. This can be pretty daunting, but the best way to teach them is to do it yourself. Don’t worry, stick around, and we’ll do it together.
Let’s face it, child-rearing is expensive. There’s the food costs, childcare, the constant need to buy more clothes (because of the food?) and whatever other expenses I haven’t experienced yet. My oldest Is only 3, and the biggest dollars are yet to be spent. Having a plan in place to grow our money, so we can live comfortably in the future, is very reassuring.
Don’t get me wrong, looking forward financially is hard to do when you’re deep in the throes of parenting, especially when so much of your time is spent putting out fires. But if you can set aside a couple of minutes a day to think about it, it can make a huge difference.
So, the question is: How do we as dads not only manage our money needs today, but also think about generational wealth building for tomorrow? This is a big one that won’t be answered in one blog post, but over time as I explore how to do this effectively myself.
What do I need to know before I start investing?
If you’re coming in fresh as a daisy, some terms, and principles used in the world of investing can be pretty intimidating. My suspicion is that the financial industry makes it difficult deliberately, so you will go and pay for professional help instead of learning to do it yourself.
We don’t need those pencil pushers!
Ok, let’s chat about some essential investment terms/ideas/principles you need to know before you jump in.
Investing is not trading.
A common misconception when people are looking into investing is thinking that being an ‘investor’ means sitting behind ten screens (seriously, why so many screens?) with green and red lines all over them. Some people, ‘traders’, actively buy and sell shares in the hopes to make a profit each time they do so.
I do not and will not ever encourage anyone to do that.
Think of it this way instead: When you invest, you are purchasing a small chunk of a company. Essentially, becoming a part owner that is entitled to any benefits the company might enjoy. In some cases, you even get to vote on key decisions within the organisation. Cool right?
There’s a good chance that I’m the part owner of the company that makes the device you’re reading this on! You can thank me later.
Thinking like this will shift your expectations from fast profit, to long-term growth and income. What you are buying is an asset, not a flipping opportunity.
Investing is a long-term game
Historically, the longer you hold an investment for, the more money you will make. This is partly due to the compounding effect (money makes money makes money), and partly because of human nature. We tend to innovate and grow things over time, companies included.
Your goals may be different, but In general, my investment timeline is at least 30 years. All going to plan, I won’t be selling until I’m retired. This gives enough time for compound interest to do its thing.
You can invest in what you know.
One great way to start thinking about what companies you want to buy is to think about the products or services you use daily. There is no better judge of whether a company is worth buying or not than one of their customers.
If you buy the product regularly, most likely countless other people do too.
Buying shares this way removes some uncertainty and guesswork around getting started, and once you’re more comfortable, you can start branching out.
A good way to get going is to have a look in your pantry. What brands do you see? Find a couple and then google the brand names with ‘shares’ or ‘stock’ written after. Google will show you some info to look over, so you can start to get used to the numbers.
As a side note, if you can’t decide what to buy, you can look at funds that include several companies within them. These exchange-traded funds, or ETFs, are great because they give you a broad range of different companies to buy in one go. Let’s get into ETFs in a later post.
You can’t predict the market.
Drill this into your brain.
Even though our day trader friends will argue otherwise, the reality is us mere mortals will never be able to predict whether a share will go up or down. Statistically, it’s almost impossible to be consistently right, and it’s not the metric you should be focusing on anyway. The quality of the company is much more important when thinking long term.
Ok, I’m interested, but how do I start investing?
Well, you can. But here’s what to do first: Invest in yourself.
Learn, learn and learn. Read books, credible sites like dadmode.io (I had to), listen to podcasts and talk to your mates. Absorb any information you can, so you can start to build out a mental map of what can be done and, more importantly, should be done in the world of investing.
Here are my three best investing books for beginners:
- The Barefoot Investor by Scott Pape - The best for total beginners
- I Will Teach You to Be Rich, Second Edition: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works by Ramit Sethi - The best for psychology and mindset
- The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Thomas J. Stanley - The best for not being a douche-bag with your money.
All of these books are entertaining and won't put you to sleep.
I’m going to go over the specifics of actually buying shares in a future post, but for now, do your research and start thinking about what your goals are with money. A little planning can go a long way.
Before I bore you to death, I just want to mention that all the information I’m sharing has was gained by jumping in and giving it a go. I started small, and you can too, let’s get stuck in!
See you in the next one. X