Investing and Finance is Fun, Math is Boring!
Why I think investing in stocks is a lot of fun, but math (in school) boring.
By. Jacob
Edited: 2018-07-31 09:54
I remember math class as one of the most boring things in school, because in reality it had very little to do with actual math. It had more to do with memorizing formulas for geometry that you were never using, or working with graphs and equations.
I also think memorizing things that are not interesting to me is one of the hardest things to do, which make math class very boring. Just as most other classes. The problem with school was (maybe still is), a lot of what you learn is totally useless.
However, while I think memorizing is hard, understanding things is not very hard. Once you reach a certain point of understanding, both memorizing and coming up with your own solutions seems a lot easier, and even fun at times.
When you invest, you start to gain useful knowledge. It trains you to manage your personal finances better, and you learn to run your personal finances like you would run a company. The result is to be felt almost immediately, which contributes to the "fun" part of investing, and encourages increased interest.
Investing with borrowed money
This is something that seems stupid on the surface, but might actually be a very smart long-term move. Often people will borrow money to buy a car, new computer, or even a house. I would consider the latter bad-investment choices (unless you really needed the car and computer). A house is usually a good investment, but it may both decrease and increase in value, which can make it a very high-risk investment.
If you borrow money at a very low interest rate, it would almost me stupid not to invest some of it, since a return would be close to guaranteed (given you choose good companies).
Diversification is very important to me, and since you could in theory loose all the money on one bad investment, you might want to limit your individual investments to around 10% of your available cash. With certain stocks, I might sometimes go as high as 25%, but only if I am very confident about their future.
Diversification
With borrowed money, diversification becomes even more important. Remember, when you invest with borrowed money and a stock goes down, the theoretical loss will at least be double up compared with investing with your own money (not counting the interest)
I actually started out investing with borrowed money, and since I learned about diversification early on, I have never actually lost money on my investments. Only earned money!
However, I have endured a few crashes in individual stocks, such as Facebook going down -20% percent overnight, and others -10%+. But, I still have a nice 40% return on my Facebook investment, and I still believe in the company. So, I am not selling my stocks in Facebook.
This again shows the importance of diversification. Dividend stocks makes it easier for me to tolerate the volatility, since I practically have a small passive income, just by earning the stock. This is not the case with Facebook, since they do not (yet) pay dividends.
I will always try to understand the companies I invest in. If I have a good understanding of the company, I also feel more confident that the business is solid, and has room for future growth. With certain things, I only have little understanding, and as such I will only invest very little (or not at all). It is about trying to manage the risk of loosing money, and increasing the chance of making money. Very interesting and fun!
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