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Investing: Being in it to win it

We’re looking at new schools for my soon-to-be high schooler son.

As parents, we’ve made so many mistakes, learning and futzing things up as we go.

I’m not the same parent as I was 13 years ago.

Investing as learning process

investors get better by learning

Investing isn’t an activity — it’s a process.

Tradestreaming is all about learning from  — and sharing — what we’ve experienced.

From my interview earlier this week with Jonathan Clements (author of The Little Book of Main Street Money and previously the personal finance columnist for the Wall Street Journal)):

A lot of what it takes to become a good investor and a good manager of your money is just time.  Think about people’s learning curve — in some sense we don’t really get an opportunity to become experts in money management unless we really put our minds to it.  Most of us will only buy 2 or 3 or 4 homes during the course of our lives — we never really get the chance to become experts at that.  So, there’s a good chance that we’re going to mess up.

Similarly, we only get to claim Social Security once, so in terms of when to claim Social Security, there’s a good chance, we’re going to mess up royally.

And similarly when it comes to investing, yeah, we’re going to get the chance to see a lot more bull and bear markets than we would opportunities to buy homes.  Nonetheless, the chance to mess up is enormous in part because people have to cope with all this noise.

4 ways to accelerate your investment experience

  1. Nothing beats experience like experience: you just have to be in it to win it.  That means ensuring your take adequate precautions to maintain your ability to stay invested.  The research shows it’s not about age, it’s about experience and time in the market.
  2. Log your experiences: Keep a trading diary.  Better yet, blog about what you’re doing, sharing your activities with others on Seeking Alpha or on  StockTwits. You’ll get feedback from others — helping to expedite your learning and climbing the learning curve.
  3. Plug into the tradestream: Use the Internet, the blogosphere, and twitter to identify top performers interested in sharing their knowledge.  If you’re interested in making sure results are what they claim to be, follow top performers on Covestor who have agreed to have their performance audited.
  4. Listen/watch the best investing podcasts: I’ve compiled a list of what I think are the best investing podcasts on iTunes.  But there are many more great ones.  I interview a lot of these experts on Tradestreaming Radio, too.  StockTwits TV in general and Abnormal Returns TV (from Abnormal Returns) are also great for access to true experts in their domains.

I’m sending my kid to high school.  Like James Altucher, I don’t know if I’ll send him to college.  There is so much information readily available to investors, you can get a degree in hard knocks if your’re diligent and interested.

You just have to plug into the Tradestream.

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Think Harvard was hard to get into from China? Try McDonalds U

Americans continue to spend oodles and oodles of money to send their children to get undergraduate degrees.  The NYT reported that college seniors had an average of $24k of debt when they graduated.

We’re not the only ones.  According to Bloomberg, getting into a McDonald’s run training program has a lower acceptance rate than high school seniors applying to Harvard:

“I’m thrilled and proud to attend Hamburger University,” said Zhou, who in 2007 started as a management trainee in the central Chinese city of Changsha, a job for which she and seven others were among 1,000 applicants. That’s a selection rate of less than 1 percent, lower than Harvard University’s record low acceptance rate last year of about 7 percent, according to the school’s official newspaper.

All this — in spite of recent evidence confirming the obvious  in Academically Adrift: Limited Learning on College Campuses (Amazon affiliate link) that (surprise!), college students, well, just don’t learn that much

…for nearly half of undergraduates, the freshman and sophomore years result in absolutely no significant gains in skills like critical thinking, writing, and complex reasoning. (Vanity Fair)

Challenging ‘College for Everyone’

Well, Chinese aspiration may account for the competitiveness in college admissions there.  Plus, working for an renown US firm like McDonalds has its perks.  But are we nuts?

Growing voices are challenging the standard of universal college education and it’s > $100,000 price tag.  For one thing, the investment in human capital just doesn’t seem to pay a large enough return.  If you just took the same money and parked it in a savings account, over a lifetime, you’d end up doing better than the $800k a college grad could expect to out-earn his boorish counterpart.

Plus, according to the National Inflation Association, tuition costs have been raised over 29% the last four years (though actual tuition paid seems to be decreasing) — it’s getting even harder to make the numbers work.

Education may be the single best investment a society can make – but maybe we’re just going about it all wrong.  The European system is different — only top students continue on to university while others get more training in the trades.  With the Internet and the ability to start a business on a shoestring, maybe we’re going about it all wrong?

Education is a real good, just not institutional education.  That’s what I tell my kids.  Last night, my 13 yr old son took an old woofer of mine and wired it so he could directly play his iPod from the woofer.  How? He looked on YouTube, spliced, and tried it on his own.  With the vast amount of education material online, a motivated student could do a lot on their own.

Of course, many children (ugh, mine included) lack initiative to tackle learning on their own.  But college doesn’t instill this anymore, anyway.

So, count me in the don’t-need-to-go-to-college-anymore.  You may not be hired by a bulge bracket I-Banking firm.  But hey, there’s more respectable other ways to make a living.

Resources

New Study Confirms the Obvious: First Two Years of College Spent Sleeping and Partying (Vanity Fair)

Getting into Harvard Easier than McDonald’s University in China (Bloomberg)

Don’t Send Your Kids to College (Altucher at Huff Post)

Is College Tuition Too Low (Economix/NYT)

Why Avoiding the Traditional Path of University Education will Help, Yes HELP, Your Children Survive the Next Five Years (Zero Hedge)