Be Your Best Stock Trader
I’m often asked, “Can anyone become an investor?” And my answer is always the same: Yes.
The question that always follows is the logical follow-up, but the answer isn’t quite so cut and dried.
You probably guessed it: How do I get started?
There is a lot to learn so I always recommend studying, investigating, and doing as much market research as possible before getting started in investing.
Once you decide which asset class you want to learn more about, I suggest going to work for someone who is already investing in that asset class. Let’s say you want to start a restaurant, my advice would be to get a job in a restaurant, working to learn. Learning every facet of the business. When you work to learn you gain something much more important than money, you gain wisdom, experience, and a creative edge.
Most investors fail due to a lack of experience, not a lack of money. If you have experience, you can always create more money.
The sad reality is that too many new investors jump in without any knowledge, invest their life savings, and are soon broke. That’s why I often say, it’s not the investment that is risky, it’s the investor.
The good news is that today’s high-tech world and the Internet allow investors to experiment faster and make mistakes with fewer risks.
Here are four steps that set successful investors apart from the rest.
Step # 1: Identify Your Goals and Your “Why”
Before you can determine if investing is worth your time, you need to know why you want to invest. Why would you want to take on this time-intensive challenge? What will truly motivate and drive you to spend the time and effort it takes to become a good investor?
It all comes down to finding your “why.” If you don’t take the time to discover your bottom line “why,” then you aren’t likely to prioritize the task. Or if you do happen to start, you probably won’t stick with it.
How many times have you started something that seemed so important but never actually got around to finishing it? It’s probably because it sounded like a great idea, but you never took the time to uncover your true reason for doing it.
Let’s say you want to invest because you want to make more money or have more cash flow or retire someday. Well, that sounds great in theory, but it’s probably not enough to inspire you when things get too demanding or you don’t see enough progress and want to quit.
What will inspire you to read the books, do the homework, attend the seminars, seek out and meet with the investing experts, or give up your days off?
Once you’ve identified your “why,” you have to trust the process.
Step # 2: Trust the Process
I always remind myself that investing is a process—even after doing it for so many years. There is no secret formula. There is no get-rich-quick pill you can take. You don’t go to bed one night and wake up wealthy in the morning. There may be people out there who promise these things but I have yet to see one that lasts for the long term.
It’s no different than losing weight. If you want to lose weight and keep it off, then there is a process you go through. You exercise regularly. You make some changes to your diet. And over time you start to see the results. It doesn’t happen overnight. But even then you still have to adjust your lifestyle to make it last.
In the process of becoming investors, we learn. We get hands-on experience. We make mistakes. We learn from our mistakes. We get more experience. And in this process, our knowledge, our confidence, and our abilities grow. Not to mention our bank accounts.
But the key is this, the process we go through is even more important than the end goal itself. Because who we become in the process, as a result of all the learning, mistakes, and experiences, is where the real value lies. There is a Chinese proverb that says: The journey is the reward.
Step # 3: Add an Extra Dose of Discipline
How many times have we heard someone say…
“I need to exercise and lose some weight.”
“I wish I could make more money.”
“How do I get out of debt? These bills are eating me alive.”
“I should start my own business.”
“I need to grow my business.”
These are the words of people who know they need to change. They need to improve their lives and move to a higher quality of life. Moving to the next level of life requires more than thoughts, wishes, and hope. It requires discipline. Discipline delivers a higher quality of life.
Many times we become prisoners of our own lives. We are trapped between our problems and our dreams. We know we need to change, but change is not always easy.
Many people do not move to a better life simply because they have become comfortable with their problems. Their problems become their life. For example:
A person can be comfortable being overweight because diet and exercise would make them uncomfortable.
A person can be comfortable in a job that does not pay enough simply because starting a business would make them very uncomfortable.
A person can be comfortable in a relationship that is dead simply because a boring marriage is more comfortable than being alone.
Improving one’s life requires discipline. Change often requires that a person be uncomfortable, learn new things, meet new people, and become a better person before the quality of their lives improves. Life does not improve until the person improves.
This is why learning discipline—the discipline of discipline—is an extremely important subject taught at military academies.
Traditional schools focus on the discipline of academics; Military schools focus on the discipline of discipline.
I chose a military academy because I knew I lacked discipline. I knew that without discipline I would never graduate and receive a college degree. And although I knew I lacked discipline, I did not learn what discipline was until I got to the Academy.
At first, I thought discipline was what someone did to me. For example, an upperclassman chewing me out—in my face, in front of the world—when I did not follow orders, clean my room, or study at night. After a while, I came to realize that discipline is what I did or did not do to myself. It slowly dawned on me that I would never become a leader if I could not discipline myself. I knew people would keep yelling at me until I became more self-disciplined.
Today, older and wiser, I know that when I feel the need to improve the quality of my life—relative to health, wealth, friends, business, and happiness—I know I need more discipline, not less.
Step # 4: Turn Poor Habits into Rich Habits
Military schools focus on changing bad habits and replacing them with better habits. To achieve this, the academies focus on developing the students mentally, emotionally, physically, and spiritually. A student who could not change the many facets of their habit patterns was often expelled.
Traditional schools focus primarily on the student’s mind. Personal behavior was not important, as long as they achieved the desired grades.
Habits are the difference between rich, middle class, and poor people. A poor person cannot become a middle-class person until they change their habits. Changing habits requires making changes mentally, emotionally, physically, and spiritually. The same is true for middle-class people who want to become rich.
Money alone does not change habits. That is why so many lottery winners and sports stars, people who come from poor backgrounds, return to being poor, once the money is gone.
The reason I created the CASHFLOW board game is that games are great teaching tools. Games have the power to change a person’s habits by engaging them mentally, emotionally, physically, and spiritually.
Reading books and listening to lectures alone will not change habits. Just as reading books and listening to lectures, alone, would not turn me into a pilot. I could know all the right answers in the classroom, but I still have to fly the plane. The same is true with becoming a rich person.
Editor, Rich Dad Poor Dad Daily