I grew up in Stockholm with two parents who had the opposite view on spending and money.
My dad used to collect furniture and other useful stuff that he found in the garbage room. He mainly saw money as an abstract thing that could only be used for primary purposes, or special events.
My mom on the other hand, leaned more towards the more common practice. If you have money, find something you can use it for.
I remember feeling twisted about this.
As a child I did not see money as something that could be used, at least not just on whatever. Luckily, later in life I learned that I should use money, not just save for better or worse, because in the end of the day, it´s only a tool to get something.
My interest in stocks started when I was about 15 – 16. I remember following a norwegian seismic company called EMGS – Electronic Magnetic Geo Services (I have no clue on why exactly this company). I looked at the shares almost every day, and read some information about the company. Actually I think I went so far that I wrote an email to the CEO which I never got any reply on. Anyhow, the end of the story is that I did not learn much since I didn´t feel the emotional stress or thought processes that owning stocks might lead to.
I ended up buying Netflix at around 180$ with some money that I had gotten in insurance after an accident in the army. I sold it with 30 % profit and thought I was the king of the stock market.
The relentless cycle
Unfortunately the most common cycle for people joins the stock world is this:
1 – Trading / Speculating
You start of as a trader / speculator. You buy random stocks. You look at the shares as they move up and down.
Maybe you think you see a pattern, or you read some analyst saying that things will for sure go up from here “This stock will at least double, if not triple”.
Suddenly, you feel amazed: “ Holy shit. This is so easy! If I just do some quick trades and raise a lot of cash so that I can finally start investing for real”. Most people lose a lot of money here, actually it´s pretty close to 95 % of all traders.
2A Cocky trader
You survived with some ugly battle scars, but you are now done as a trader. You´re tired of losing sleep, because you have put a lot of money and bought something having no clue what it really is, and every day is an either a nightmare or a triple rainbow.
You start searching the internet after keywords as “investing”, “which books should I read”, and you start by reading “The intelligent investor” by Benjamin Graham.
You finish the book halfway through, but there are so many words, so many new things and concepts.
So you forget about it for a while and put the “investing project” on the shelf for better times. As a replacement you start learning about technical analyses and you find it very easy and logical “Buying at the bottom and selling at the top” how hard can that be?
At this point, a lot of people falls back to point 1) trading, because they now think that they have enough knowledge to beat the rest of the market (the people who buys and sells stocks). Unfortunately, these guys will lose too, and most of them will never touch a stock ever again ( some guys actually figures out a way to use technical analyses to make profit, but it takes a lot of rules and you have to be super strict. Not something beginners should try to do)
2B MR Smart guy
Respect. You didn´t even touch the trader path. Instead, you went straight into safe saving and started monthly saving in funds. Good for you. But from here, you might forget about the money, and never see them again until your old and boring. Well, that´s a shame.
You might also check your account every other year and see that the fund is doing quite well, hurrah. But then you tell your buddy about this extraordinary achievement, and he says you would be better of just saving in index? What? Index? WHO is that? (I´ll tell you all about this later)
2C Humble novice investor
You were so close doing the 2A – road, but instead of quitting after mr. Graham’s book, you joined an investment forum, listened to podcasts about investing, read blogs and you talked with people who had considerable knowledgeable about investing.
They told you what diversification is, how to buy stocks and what brokerage is. They even told you that it might be smart to buy good companies in other stock exchanges, not just your familiar stock exchange.
They also talked about a method called fundamental research and you start to learn what key numbers like P/E, P/B and yield is. Basically, your saved.
I must admit that I was halfway through 2A, but I was lucky.
I was saved by some very kind individuals who thought me that I should do things differently, and they also showed me how. And that is why I have made this blog.
To make sure that people who are in the process of joining 2A can be “saved” the same way I was.
I´m not saying that I have found the only right and true method, but I can show you that my alternative is soooo much better than what you were trying to do. Some readers might already be at 2B, or even 3, 4 ,5 or 6 whatever that is, and I will try to make it interesting for you guys as well.