Let Curiosity Guide You, But Common Sense Protect You

One of the biggest challenges to being new to investing is that you simply don’t know where to start. Sure you may start by reading a few magazine articles. But it can be overwhelming when they start talking about things like asset allocation, Index funds, P/E ratios, Large cap, Growth sectors, Valuations, etc. What does all this stuff even mean?

The truth is that you don’t need to know everything about everything to get rich. In fact, I would venture to say that most people don’t. In reality, you really only need two things to get started on your investment journey: Curiosity and Common Sense.

We All Start Somewhere:

No one comes into this world being a financial genius. It is something we learn along the way. And if you feel left behind, don’t worry. You will learn how to be a good investor too. But it is going to take time.

Consider how curiosity led me through my own personal journey:

• Around age 16, I started my first part-time job and opened a savings account earning a pretty low percentage of interest. One day while in line at the bank, I noticed a promotional sign for a CD (certificate of deposit). The interest rate was a lot better than what I was getting with my savings account, so I decided I should look further into it.

• After moving my money to CD’s, I realized I needed more flexibility and a better rate of return. That’s when I noticed online savings accounts and decided I should learn more about them.

• A few years after moving my money to online accounts, I began noticing that mutual funds were always promoted in magazines. Seeking a better rate of return, I started reading books about them and decide to open an account.

• After building up my mutual funds, I learned that there were significant tax advantages to other accounts like 401k’s and IRA’s. I decided to learn about the rules of these accounts and what benefits I would receive by moving my money into them.

• Getting pretty stable but relatively low returns on my mutual funds, I began to hear about people making some great returns with their individual stock purchases. I again turned to many resources for advice, and stepped lightly into the field by buying only a few shares at a time.

And what role did common sense play?

• CD: I knew I’d need the money soon for college, so I didn’t lock up all of it. I also only used short-term ones rather than locking up my money for the long-term.

• Online Savings Account: Would you wire your money to just anyone? Not a chance! I made sure the company was legitimate and just as reputable as a regular brick-and-mortar type of bank.

• Mutual Funds: There was a lot of opportunity to get into trouble here. I made sure to choose a low cost provider like Vanguard and I picked relatively low-risk funds like hybrid funds (a combination of stocks and bonds).

• Retirement: Putting all your money into tax-sheltered accounts sounds great until you find out there is a 10% penalty for early withdrawals. I made sure I understood the rules carefully, invested enough to get my employer match, and keep enough outside my accounts for emergencies.

• Stocks: Common sense said that no matter what you think, anything can happen. I made sure to start small and never bet the farm. Even if I am fortunate with one company, I need to remember that what goes up must come down.

Do What Works For You:

In each of these situations, I was curious about a topic and decided to research it further – one topic at a time. There were no deadlines or time constraints. I took each at my own rate and at my own level of comfort.

But at the same time, you have to be the judge of what is right for you. This is where common sense comes into play. If an investment feels wrong, then don’t do it. No one is forcing you. As I always say, no one will be looking out for your money the way you will.

And most importantly, remember that you are never really done. To this day, I still have a great deal to learn about many subjects like stocks, bonds, real estate, precious metals, annuities, business ventures, and so on! The process is never complete and is always ongoing.

If you’re interesting in getting started with investing, check out my Top Money Book Recommendations. Each of these (in addition to many other resources) was a big help to me on a wide variety of topics. Remember, we all have to start somewhere. And I hope you can use my blog as one of those resources that helps you to move along your own personal path.

Readers: To what do you attribute getting you into investing? What keeps you out of trouble? Do you consider yourself to be a beginner or advanced? What resources do you rely upon for safe and reliable information? Please feel free to share!


Related Posts:

1) Guess What – You Might Be Richer Than You Think!

2) Why Do You Want to Retire?

3) Why Care About Money?

Photo Credit: Microsoft Clip Art


    • MMD says

      Interesting! What position did you have at Wachovia?

      You are in good company! I am also trying to learn more about individual stocks (or rather become more comfortable picking them). I’ve been brushing up on strategies for valuation, but there seems to be a lot of white noise out there about which metrics are the best ones to use. One of the one’s that lead me to Apple was comparing a company’s assets to their sales:


      The nice thing about a metric like this is that it takes the price of the stock right out of the equation and forces you to look at two very tangible numbers.

  1. says

    Excellent post! I love the curiousity and common sense aspect as I think it is very true. If you are curious about any topic and do not know much about it, common sense would dictate for you to do some research and learn…right? :)

    I contribute my mother’s frugal and wise with money ways on what got me interested in investments. I saw how she did a lot with the little she had and grew it into something so much more. She ended up having more money than others that made twice her salary. This drove my curiousity to learn. My first job was as a bank teller for BofA at the young age of 16! I learned a lot and haven’t stopped since!
    Taline recently posted..I just sold a property overseas…so why am I not thrilled?My Profile

    • MMD says

      After reading your post about the terrible tragedy in your family, it’s remarkable how far each member of your family has come in their own way towards achieving success. Your mother’s ambition is certainly admirable and has obviously rubbed off on you!

  2. says

    i am really just getting started on investing.. there is so much out there.. we are of course, first and foremost trying to pay off our debt.. but both my retirement and our emergency fund is tied up in investments (i know, i know.. some people frown on that)..

    there is so much out there.. and the more i read, the more i want to know.. sites like yours certainly pique my curiosity..
    jefferson recently posted..New Job? How to be an Office Rock Star From Day OneMy Profile

    • MMD says

      I’m very glad to hear! Hopefully some of my articles will teach you something new! The trick is not to get too far ahead of yourself. Set small goals for yourself and work through them. Once you start accomplishing them, the process will become addictive and you’ll want to learn more. You’ve certainly got a great jump start if you are already using your free-time to visit financial blogs.

    • MMD says

      There is no shame in deferring to the pros! On financial matters or likewise. In fact, I do this often at work and I often credit my own successes to knowing when to leave it to the experts. But I do hope you continue to visit and learn from my stories.

  3. MMD says

    Reading the PF blogs has helped me a lot too. When you see regular, everyday people figuring out how all this stuff works, it becomes very motivating. You said it though – you have to decide which investments are right for you first (even if they change over time).

  4. Katie says

    I am a beginner invester. I actually just bought my first stock a couple of weeks ago. I started getting into the idea of investing after reading various PF books, but I actually enjoy reading blogs and learning from other bloggers mistakes or accomplishments.

    • MMD says

      Good job on taking the leap of faith! What was the stock pick of the year?

      You are very wise to read up on all these things first in PF books. That was how a great deal of my knowledge and confidence was developed. The blogs have also been very helpful along the same lines.

      By making your first purchase, you are also doing something very important – putting yourself on the line. It’s one thing to read about money, but when you make a real investment (and I don’t care how small it may be), you start to pay attention to these things a little bit differently!

  5. says

    Hi MMD,
    This is very interesting!I’m glad to know that I don’t need to know everything to get rich because you’re right it’s a little overwhelming coming across all those terms.
    I’m kind of late getting into investing. I got interested in it when I first started reading Personal Finance blogs.
    When I was young I used to think that people get rich by studying hard in school and getting a degree and a good job but I’ve realized that it takes so much more.
    I’m determined to continue my financial education and share what I’ve learned with my kids to help them be wiser that I am.
    Thanks for sharing with us what you’ve learned.
    Theresa Torres recently posted..Where Does All My Money Go?My Profile

    • MMD says

      Hi Theresa: Welcome to the site! It’s never too late to get into the investing game. There are always simple things like saving money and budgeting that can help you start. Then you can move into ready-made investments like Index Funds (which are a piece of cake to buy). And then the sky is the limit! Hopefully I can teach you a few tricks on this blog!

  6. Karunesh @ chase-a-dream.com says

    There cannot be any growth without Curiosity, exploring, trying something new – try new places of investments. but never forget the foundations – diversify, cover your liabilities

    • MMD says

      Karunesh: Very true! You’ll never get rich if you don’t try new things and make an effort to put yourself out there. But there is never a reason to take unnecessary risks either! A good compromise of both is the way to go!

  7. says

    I started the same way with money like you did. I learned as I went, and because I was curious to expand my money horizons. I learned lots of things I didn’t want to do, and lots of things I liked. I definitely agree with your point about not having time constraints. I believe everyone learns best through their own experience and when they take their time. At least that’s how I like to learn!
    Carrie Smith recently posted..Book Review: Money Rules by Jean ChatzkyMy Profile

    • MMD says

      You’re absolutely right! When it comes to your money, rushing the process is a disaster. I believe everyone should take it at their own pace and level of comfort.

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