Reading about workout routines and TRX system is really not the same thing as going to to the gym. It is the same with investing, there is no way to really understand investing until you just do it. I have been investing for seven years now, and it has taught me many things I continue to carry with me.
The first being the importance of experience. There is a common saying: “Buy low. Sell high.” That makes sense, right? But to buy low means that it is only when the market drops, your palms get sweaty, you feel unsure, you look at your stock quote, and it is in that bright red color, do you understand that saying. It is one thing to read “buy low, sell high” in a book. Of course, it makes logical sense when you read it, but it is quite another thing to actually do it.
If you are a fan of detective stories like me, then you probably know Father Brown by GK Chesterton. I did not know this quote at the time I invested in Mattel, but it is a good way to think about it:
“The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite… It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.”
Humility really matters in investing, investing is about the future, and the future is unpredictable. Staying humble means understanding that no matter how hard you crunch the numbers, this isn’t calculus class, and the answer you derive is never perfect. One day, it is kids playing with dolls, and the next day some California guy in a black turtleneck puts a piece of metal in everyone’s hands, and a 60-year-old toymaker goes poof. Not even math can protect you then. Numbers can sometimes tell you if you are wrong, but by themselves, numbers are not enough to be right. In the end, it is all about moats.
Investing has also taught me to work hard on analysis. I like to call it nerdiness. Making mistakes is part of the process, it happens to everyone. But not everyone learns from their mistakes. Wouldn’t you rather learn how I lost money on Mattel and know not to make that same mistake yourself? So, nerdiness allows you to keep your mind open to new information and have an ongoing desire to learn from others.
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Maya Peterson is a 16-year-old investor and author of Early Bird: The Power of Investing Young