The following blog was written by SEONG RYOO, our 2020 Summer Instructor and rising senior at Emory University pursuing a BBA in accounting, Finance and Accounting.
Investing is always one of the most popular camp topics at Wealthy Habits.
Here are some basics we want parents to know before starting their investing journey:
Being young is a huge advantage when it comes to investing. Being young means that you have more time to make more profit, and you have more time to learn from mistakes at less cost.
The recipe to build wealth is no longer a secret. The ingredient needed for you to become wealthy is time. Time is something that even the richest person in the world cannot buy. It is something even the smartest person on the Earth cannot invent. Time is extremely valuable in investing because it is the basic law of growing the profit from an investment. Investment is like a snowball rolling down the side of the mountain. It gets bigger at a faster speed as the snowball has been running down the slope for longer. And this is why it is more advantageous to start investing early. The younger you are, the more time you have.
No one can guarantee that you’ll always make a profit from your investment. Sometimes people make mistakes, and kids have the advantage to fix them. They can learn from past mistakes and make better investment choices in the future. It is easier to fix a mistake you made when you are younger and have relatively fewer responsibilities than when you are older and have a family and other obligations. You can learn from your mistakes at a cheaper price when you are younger.
Investing is a double-edged sword. There are certainly benefits to investing, but it is important to understand the risks. A clear benefit from investing is that you can build wealth without having to work for it. The negative aspect of investing is that you may lose money. Some investors get addicted to investing and spend most of their day looking at the graphs and following the stock market. Some investors leverage more than they can handle and fall into huge debt. Investing can be very dangerous if it is done irresponsibly.
Investing is more than just buying an asset. Investing is a mental game that involves a lot of emotion. It requires confidence in your research and your decision-making as well as devising and sticking to an exit plan. Check out our blog that explains why buying low and selling high is harder here.
Endurance is important in investing. Remember that it takes time for your investments to grow, so don’t let your feeling get the best of you. Don’t make irrational decisions because you are happy or scared. As if you are growing a tree, there will be sunny days and rainy days before you will be able to taste its sweet fruit.
Making decisions is an extremely crucial part of investing. You should never just follow other people and jump on a bandwagon. Those people will not be responsible for the consequences of your action. You should always do your own research, build your own opinions, and make your own decisions. Because you are the one who is taking on the responsibility, you should be in charge of all of your investment decisions.
Investing is not speculating. Many people confuse investing with gambling. I agree that both investing and gambling have uncertainty in common. However, investing and betting are different because you can manage and adjust the level of risk when you invest, and investments have a higher chance of success than gambling.
I want to share a line that I always keep in mind when I think about investing: It is not the smart one making a profit. It is the humble and disciplined one making a profit.
If you’d like your child to learn more about investing, check out our programs for one that fits your family’s needs.