PART III – “HOW TO” OF EACH STEP
– I recommend going with a book on personal finances before turning to online resources. Although there are many websites & online resources that give specific tips, I find them more useful after having a more organized game plan first, and general personal finance education/knowledge. I found information and sections of the book “Rich Dad Poor Dad” was sufficiently adequate to get anyone thinking about looking at their personal finances. However, your individual situation may warrant more in-depth discussion, analysis, methods, & techniques. Since personal finances play such an important starting role in investing, an entire book on the subject matter is not a bad idea.
Educate Yourself On Subject Area, Increase Your Knowledge Continually:
– Books are one of the very best resources as you are learning from successful people.
– General investing – The book “Rich Dad, Poor Dad”, by Robert Kiyosaki gives an overview of investing, goals, attitude, commitment, etc. It may seem too general at first. Many people also ridicule the author & pass the book off right away. Its only years later, that I truly appreciate & see how necessary & important the information in it is. It’s no reason why many successful people say its a good book, & many unsuccessful say it isn’t. Kiyosaki writes more general/high-level books (good overall knowledge & shaping of an investor). Kiyosaki’s other books such as “Cash Flow Quadrant”, and “Rich Dad’s Guide To Investing”, are also recommended for this scope of knowledge.
– Subject area – To gain working knowledge of specific investment vehicles & subject areas, I recommend picking books directly related those areas.
– Terminology – Wikipedia and investopedia are great online resources for specific terminology & definitions.
– For stocks, I recommend “The Intelligent Investor”, by Benjamin Graham as a starting point. Benjamin Graham was Warren Buffet’s teacher, and in the Berkshire annual reports, Buffet always recommends reading & re-reading the book. It is filled with useful information (stocks, bonds, passive/active investor, economic history, the market, concept of value, role of emotions, etc.).
– For real estate I found Robert Kiyosaki’s “Real Estate Riches” to be a good starting point. Picking up other books for either Canadian or US real estate market are recommended as well for even more detailed knowledge.
– I also recommend picking up a book on taxes, as they will now become an important part of investing.
– Government websites are also good resources to educate yourself on local tax policies, as well as the laws. Do not dive into an investment without knowing what tax implications it will have. Learn the related laws affecting the investment as well. For real estate the laws and local city by-laws are especially important, and will affect what you do or how you operate.
– Try to dedicate time every week to learn and add to your knowledge.
– Always evaluate your knowledge. Look to improve on areas that are lacking, or need that need to be more refined. The moment you stop, is the moment you have placed a limit on yourself.
Educate Yourself On The Economy & General Economic Trends:
– Newspapers are a good source of economic information. However, they can be double edged swords. Be aware that the media loves to put their own spin on the news. They sometimes will make wrong interpretations, or simply misstate the facts. Other times, they may purposely withhold facts to present a partial picture of events, in order to force viewers/readers to make certain assumptions. In Canada, specific newspapers back & support specific political parties. This obviously results in unaware readers being unknowingly swayed politically, as they lead to believe that the newspaper’s opinions & presentation of political news are unbiased when they actually are.
– Always check a number of sources.
– Take opinions of the news as just that, opinions.
– Focus on the facts, and be aware that there may be facts purposely withheld.
– Try to determine the validity of the facts. Does it sound reasonable, logical, is there a source for the presented data? What might be the intention of the reporting news agency (ratings, viewership, popularity)?
– News resources that I like & find to be unbiased:
The Financial Post, The Wall Street Journal, The Globe And Mail, The Economist, Reuters, Bloomberg.
– Try to take 5-10 minutes at the beginning & end of the work day, to read business & economic news. Even just reading the headlines is better than nothing, and increases your awareness of the world we live in.
Make Sure You Have the Right Attitude & Mindset:
– This is the most difficult to achieve for an investor.
– The general investment books such as “Rich Dad, Poor Dad”, and others, definitely help in this department. They will help push you in the right direction. But you need to be able to have the courage to walk the path.
– “The Strangest Secret” by Earl Nightingale, and “Think And Grow Rich” by Napoleon Hill, are two classics that also help direct an individual toward the right the attitude and mind set.
– There are a vast number of books in the Self Help & Self Improvement sections of book stores to help in the development of discipline, self-control, patience, and the attitude for learning & knowledge. Visit your local bookstore and browse some of them to find one suitable for yourself.
– If you are looking for a more direct & interesting method, I have found that throughout my life martial arts have helped to develop the same characteristics & attitudes that I have mentioned above, as well as will power. In martial arts, your performance is a direct projection of the way you think & handle situations. An impatient fighter with no emotional self-control becomes sloppy & unfocused, losing to more patient & disciplined fighters. Students who have a large ego and rush through drills, never develops the proper techniques. During training sessions your will power is tested & developed, as you push your body to perform & maintain composure when you are feeling tired & fatigued. It also helps develop courage to believe in your own skills & convictions. This courage will help you to go against the herd, which will be often.
– Self-Improvement books may also help in the area of accepting & learning from mistakes, getting rid of your ego, keeping an open mind, and dealing with & being aware of your emotions.
– Be very careful about who you listen to & take advice from. It never hurts to listen, but what advice you actually follow matters. I recommend taking advice from people who are already successful or on their way to becoming successful. You don’t need to know them directly or personally. Written material are good resources. Warren Buffet’s annual report is full of advice! But even on a smaller scale. People you know who are successful in certain areas or more successful than yourself, may have some helpful advice.
– There will always be individuals who disagree or talk about the adversity and how you could fail. Again, use your own common sense & judgment to determine how valid their advice is. Some good questions to ask yourself are :
– – Do they possess adequate knowledge of the subject area?
– – What is the difference between your knowledge & theirs?
– – Do they have experience of the subject area?
– – What will you be doing that is different?
– – What type of mind set do they have?
– Many authors of books also have their own investment philosophy. Many people who “invest”, are fixated on a single investment philosophy & invalidate all others. They treat them as religions, rather than a technique or part of their toolbox. There are some things that just aren’t sound, but you will need to use your own judgment & decide if they really know what they are talking about. The classic example in stocks is market efficiency. Some say it is sufficiently efficient to the point that only index funds can be successful. Others believe that in the short term, it is not fully efficient & investor emotions create opportunities. It is good to be aware of the narrow mindedness of the general public. Some approaches are suited to certain individuals, while others are suited to different individuals.
Know How To Find A Competent, Knowledgeable, Honest Financial Advisor:
– Consider interviewing and through a number of advisors, until you find the type of person who knows what they are doing. The pitfall of that is, those people don’t stay in those positions too long, and travel up the ladder pretty quickly. Look for these key characteristics :
– – Knows their stuff.
– – Not afraid to say they don’t know the answer, and knows where to find the answer for you.
– – Not afraid to tell you how they are paid.
– – Not afraid to go against the grain based on facts (suggest financial products from other companies & firms, suggest getting rid of a product their company is marketing, reducing holdings in a particular asset class when others are increasing their holdings, etc).
– – Excelling in their area of work.
– – Willing to spend time answering questions.
– – Not just interested in selling you products.
– – Knowledgeable about the economy.
– – Fills in the knowledge gaps that you need to have, so that you can make sound decisions.
– – Able to get things done.
– Ask friends and family if they know a good advisor. If you know someone who is successful, most likely they will also have a good advisor. Ask your doctor, dentist, lawyer if they can recommend anyone of high integrity.
Know Yourself, Your Needs, Your Goals:
– Leave your ego behind, and perform an honest evaluation of your strengths & weaknesses, circle of competence, and personal situation (financial, life, etc). Ask friends and family to help in your assessment. Accept the honest results of your findings. There is nothing to be ashamed of or feel bad about. But you really need to know where you stand.
– Know your needs & goals – From your assessment you can then define goals to strive for. Create long, medium, and short term goals. Your goals may and probably will change as you evolve and grow. Constantly evaluate and review your goals. If you are married, it is very important to include your spouse in the goal defining activities.
– If you are not good at defining goals, pick up a book to help get you started.
Build Your Advisory Team:
– Accountant – You want to find an accountant who will actually spend time doing your taxes, and not just pump your numbers into tax software. They should know where taxes can be reduced legitimately, rather than by hiding or misrepresenting information. A decent accountant will cost you more than $100 per tax filing, but will save you money in the long run, keep you out of trouble with the tax man, and ultimately increase your wealth.
– Real Estate Agent – If you plan on investing in real estate, find a good agent. Because agents work on commission, there needs to be an understanding that you want to make money, but acknowledge that they should be adequately compensated as well. The agent should be in it for the long run, and not be overly aggressive in getting you to buy or sell so that they can make some quick money. They should steer you away from potential real estate disasters and have the patience to help you find the right investment, or avoid investing all together if they feel it is not appropriate. They should be familiar with the type of real estate you are interested in (industrial, residential, commercial, undeveloped land, etc).
– Lawyer – Find a lawyer who has the patience to explain things to you clearly to ensure that you understand fully all legal matters you are involved with. The last thing you want is to pay big bucks and have the lawyer rush through legal jargon. They should be familiar with whatever area you are dealing with (real estate, business, etc).
– Characteristics of any advisor to look for: They should be honest & knowledgeable. They should be willing to answer some of your questions, without wanting you to pay them for every second of their time. This shows that they genuinely want to help you, and want to keep you as a long term client. They would understand that it is mutually beneficial, that if they help you accumulate wealth, they also help themselves as you remain their client.
– Ask friends & family, doctor, dentist, other advisors, if they can recommend anyone of high integrity.
In the near future I plan to write short reviews of the mentioned books. I have taken the time to list and provide links (see below) to Amazon.com/.ca and Chapters.ca for the recommended versions of the books. Some online stores don’t have all the books, but I find Amazon.com to have them all. If you are going to purchase from these retailers, I would definitely appreciate my readers going through my associate referral links below. Note to Canadian purchasers, Amazon.com also ships to Canada.
I hope that you enjoyed this short, three article series. I think it has covered enough to get any aspiring investor started in the right direction. For more investment principles and advice, please review my other articles and visit periodically. I usually update my page once every one to two weeks so I don’t overload people with information.
Let me know if you enjoyed this article, or if there is something you want me to write about next time.
Thanks & Happy Investing!
The Investment Blogger
Amazon.ca – Books:
Amazon.ca – Audiobooks/CD:
Chapters.ca – Books:
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Chapters.ca – Audiobooks/CD:
All Chapters.ca links are encrypted