Joney Talks!

Don’t keep that money under the mattress!

In today’s episode, we will speak to my friend Jesse from The Best interest.

We met through Twitter and other personal finance communities and when I heard him speak on Michelle is money Hungry’s Podcast I thought: “I want this guy here too!”. Jesse has a talent for explaining complex matters in simple terms especially when it comes to investing as you will hear.

We will talk about how to overcome the mental barriers to start investing in the stock market: How to start from what you know and move to better investing decisions, why you should invest in the first place and we will also discuss the pretty cool concept of loss aversion (which you are actually already familiar with).

Listen here:

…or listen on Apple Podcasts

This episode is for you if you know investing is the right move for your finances but there is still something holding you back. That is absolutely normal but I hope this conversation can help you overcome that blocking point and help you get started with investing 🙌.

Key Takeaways:

• Should I invest in this trendy GameStop stock everyone is talking about?
  • Use the Socratic method and ask yourself questions to weed your own path. What are the business fundamentals? what do you like about the company? Why has the stock gone up so much? This is valid for every type of company you want to analyze and invest in.
  • When it comes to individual stocks, you can pick a handful and diversify your risk but we can not be experts at all of them. Luckily there is a boring but effective solution to that problem.
• Index funds
  • We are not expert enough but we can make a fair judgment that the economy as a whole wants to grow.
  • A way to benefit from this long-term growth is investing in index funds which are a collection of shares from the whole market.
  • From historical data, the markets are going upwards (with ups and downs) at an average rate of 7%. This means that it is doubling every 10 years (you can use the rule of 72: 72/7=10 years).
  • It is boring but effective.
• What is the reason to invest? Why start investing?
  • Investing puts your money to work, allowing it to grow without additional effort from you. Everyone will have their reason to invest like earlier retirement or making work optional for example.
  • Opportunity costs of not investing: If someone doesn’t invest, their typical alternative is sticking money in the bank.
  • You will miss on returns from risk-free Treasury bonds (US), stock markets returns, and your money under the mattress can even lose its purchasing power due to inflation.
  • Not investing will affect your long-term wealth, the longer you sit with money under your bed the more you will “pay” for those costs.
• Loss aversion:
  • The average human being will feel much worse about a $100 loss than he will feel happy about a $100 gain.
  • Mathematically, the stock market is the best option but we are humans, it is hard to deal with the losses.
  • We need to remove the emotions from investing. A fire drill on your finances is a good way to do it, so you do not panic sell during a crash. It is about thinking ahead be mentally prepared.
• Diversify your information sources
  • Read different sources, listen to different podcasts, watch different news channels.
  • Look for people who sound rational, people who explain themselves really well. After a while, you will find a sort of consensus and you will be able to find a rationale that speaks to you personally.
• Do people still put money under their mattresses 🧐😁?

Who is Jesse?

Jesse Cramer is the founder of The Best Interest – a financial education company comprising a blog, podcast, and newsletter for financial advisors’ clients. He resides in Rochester, NY, USA, with his girlfriend, Kelly, and their dog, Sadie.

RESOURCES 

• Website: The Best interest
• Podcast: The Best Interest Podcast
• Twitter: @BestInterest_JC
• Podcast episode on cryptocurrency with Michelle: Bitcoin Decoded with Jesse Cramer from The Best Interest
• Book recommendation:
  • A Random Walk Down Wall Street
  • The Bogleheads Guide To investing
• Best purchase under 100 dollars: A high-quality Bluetooth speaker

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