The investor mindset is different from the mindset most of us regular people use to go through a day, a week and a month. We have more immediate concerns and, informed by experiences of our past, we have quick short-term decisions on a daily basis. Also, we tend to try and avoid risk. The investor mindset is different. You immediately face certain truths and you cannot lie to yourself about the investment process, time frame and possible outcomes. Unless you inherited money that can generate income for you, you have to think long-term. You need to understand that wealth takes time to build, and if you were not fortunate to inherit any, yes you will need to spend your life building it. Yes, it will often take until retirement, for most of us. You cannot expect anything better, except maybe an early retirement if your investment strategies do exceptionally well. Next, you face the truth that the only way you could retire early is if you learn about investing in your free time so you know what you are doing and so you can diversify. If you just pay into your RRSP and do not even know what companies and industries your RRSP money is in, you are letting someone else do everything for you and you pay the highest price for it. If you learn a thing or two, you can invest some of your money by yourself, and over time your personal investments into stocks, etf's and more can outperform your RRSP's growth. The next important part of this mindset is exploration which is risky but, unlike playing lottery, still has a chance to give you excellent return on the money you put into it. I am talking about high leverage trading with instruments like CFD's and options, buying and long holding bitcoin, investing in new companies like people did when pot companies popped up on the markets just before legalization in Canada and so on. Yes, you are very likely to lose money or only break even in this category, but when you win you can win bigger than if you put that same money into RRSP or another less risky category. Now, why did I fail to mention savings accounts? It is because prime interest rate has been ridiculously low for years in order to prop up our economy, and regular people get horribly low return on putting money into savings accounts and letting it compound in there. Finally, the most important truth to face in the investment mindset is that you could lose a lot of money, lose almost everything, you could die before you get to enjoy your wealth... Nevertheless, this is no reason to opt out of investing. It is mandatory for you, and you need to start early. It is that simple and you do not abandon this task if you approach investing with- you guessed it- the mindset of an investor!
So, as you may gather, I believe in diversifying your investment approach from standard and generally safe to very risky and properly allocating investment money so that most it is invested safely. I know that hindsight is 20:20, and I do not let it influence my strict investment rules and neither should anyone else who wants to do this right. I believe that, while you are still in school, you should start with any RRSP contributions you can manage as a student. RRSP has the power of compound interest, which is the main way for most people to end up rich or at least financially super secure over a long period of time. Because of how compound interest works, by spreading out contributions over a longer period of time you will end up with a lot more money than if you take the same total amount of contributions and invest it over a short period of time. So, you must start this early. Next, when you are done with school and if you are lucky enough to have a full-time job after, you need to save and put aside at least $1,000 as soon as you can and open a basic trading account with a cheap or zero commission broker. You also need to learn how to read basic stock charts, as well as a few indicators like MACD, RSI, Bollinger Bands and similar. Finally, you need to read up on companies that you want to buy stock of, and then you are ready to do so. The advantage you get from this is that the money you invest this way can react quickly. Unlike with RRSP, you can sell high and buy low any time you feel your purchased shares will dip, or when something will cause the markets to correct or crash. This is extremely useful and you may decide to keep putting more money in your personal trading account over time. Finally, we come to the exploration and high risk part of diversification. You have your RRSP, you invest some of your money more actively through a broker, but now you have a little more disposable income to search for potential gold mines. You go and buy some bitcoin or a different cryptocurrency because it may become extremely valuable 20 years from now. Maybe not. So, you spend a limited amount of money that you can afford to lose completely in the worst case scenario. Then, you open a trading account with a broker that allows you to trade with leverage, and choose something like CFD's. You can Google what a CFD is, I DO NOT ENDORSE IT, but bottom line it allows you a form of access to buying shares of companies like Netflix or Tesla with 10, 20, 30 or more times the money you put in. So, this means you can for example trade $30,000 worth of Netflix stock while having only $1,000 in your trading account. You have to pay trading fees and interest fees on the extra money you use that is not yours, but in return you get a chance to speculate on your chosen stocks like you had a lot of money, and get some amazing returns. However, there is a catch. In our Netflix example, if that 30K of Netflix stock is down by $1,000 while you are holding it, your $1,000 is wiped out and your broker will automatically liquidate your position. If there is slippage, meaning that your position is not liquidated fast enough and the stock price decreases even more, you owe the broker the extra money you lose. So, after doing more research into this, I realized that anyone who puts some of their exploration and high risk investment money into this, really has to do a few important things. First, create complex orders where, in our Netflix example, you set a complex order where the stock you bough is automatically sold if the position is down by a few hundred dollars. That way, you will not risk burning out and owing your broker money. Second, if you are still learning and you lose $1,000 in a week, that is a $1,000 lesson. If you believe you will end up making good money this way over time, wait until you save another $1,000 and try again, but do not take money away from your RRSP and other investments you do- stick to your own rules. Finally, if you see that high leverage investing is not for you, stop before you get emotionally and psychologically damaged by the process, and do not look back at the money you lost; it was money spent learning something important. What you learn here will empower you in other avenues of your investment diversification.
Usually, when you start to invest, especially if you are still in school, chances are you are surrounded by people who tell you not do it. Use your money now, have fun with it, buy stuff, who cares if you have lots of money when you are old etc. Leaving aside how horribly our public school system fails us by not teaching us money management and investing, none of these attitudes are correct or helpful. I was repeatedly told that when you become a mature adult with real financial responsibilities, you will end up hating your teen and young adult self for spending money carelessly on 90% useless shit or things that are completely outside of your financial means. I am slowly beginning to realize that smart experienced people who told me that over the years were right. Second, you do not have to wait until age 65 or 70 to start enjoying your wealth. You can retire or partially retire early and make arrangement to supplement your income from your investments without wiping them out completely before you die. Or, if you do get terminally ill, you can still take all the money you invested thus far and either help people you care about or have one amazing send-off, or both. So, overall, I have found zero good arguments to avoid the responsibility of investing some of your disposable income throughout your lifetime.
So there you have it, dearest readers. I wish I knew all of this earlier in life, but for me and many other people out there it is still not too late. I am really glad that I know this (and more) right now, and I hope you find this useful and informative :)