10 Essential Things I’ve Learned That Made Me A Better Investor

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I’m getting older by each passing day.

At the time of this writing it is my birthday, I’m now 32 years old.

Here are 10 life lessons I’ve learned that made me a better investor.


1. Compound Interest Still Blows My Mind

It’s hard to believe that $65.7 billion of Warren Buffett’s $66 billion net worth came after his 50th birthday.

But it did.

Compound interest blows people’s minds.

I still remember when my brother told me about index funds.

At that time I knew nothing about stocks.

I did some calculations and was litterally blown away by the effect of compound interest.

I started my investing journey with aprox. $800 in january 2018.

Fast forward to august 2019: my portfolio consists of $175,000 invested in index funds tracking MSCI World (70 %) and MSCI Emerging Markets (30 %).

You can see the value below.


Figure 1: Value of index funds per 1. august 2019

I got $175,000 invested today.

Let’s look how much my portfolio will be worth in 30 years with my current lifestyle.

I assume 10% yearly growth (not counting inflation in here).

I’m also assuming that I invest aprox. $40,000/year.

After 30 years I would have almost $10 millions.

Unbelieveable.

Just look at the difference between year 20 and 30.

Enough said.

2. I’ve Learned To Welcome Volatility

Volatility is not risk, it is the source of future returns.

Drawdowns should be embraced, not fled from.

The only reason stocks can go up is because they can also go down.

Imagine stocks never going down.

What would you pay for those stocks?

In theory, you would pay an infinite number.

And you would never sell.

The only reason stocks can go up is because they can also go down.

It is this risk that keeps investors in check and that keeps people from paying an infinite amount of money for shares in a business.

When you see the blood-red numbers in front of you on your screen, that panic you hear in people’s voices; those sights and sounds are the physical manifestation of the equity risk.

Stock investors get paid for facing these fears because so many others will not face them.

When nobody fears anything, stocks no longer work for investors’ long-term return needs.

When the possibility of loss goes away, so does the probability of gain.

3. A diversified portfolio needs time to grow

Over time stocks go up.

But they only go up because they’re risky, which means sometimes they go down a lot and stay there for long periods of time.

Thinking long-term means you don’t act out of emotion.

It means that your goals don’t fluctuate with the market.

It means having a plan and sticking to it.

The most successful investors are able to ignore the things today that they know won’t matter tomorrow.

As Nassim Taleb said:

“When I see an investor monitoring his portfolio with live prices on his cellular telephone or handheld, I smile and smile”.

Markets look phenomenal and rewarding when you zoom out, because they are.

But people don’t live zoomed out.

They live day to day, month to month, brokerage statement to brokerage statement, where even the best of times come with the constant sting of reminding you that markets owe you nothing without requiring patience and endurance in return.

It’s hard to believe that stocks can rise or fall 30% or more with hardly any change to their business fundamentals.

And that’s a great argument for not check up on your stocks so often, because it’s almost always noise.

I don’t think there is a better way for the average investor to grow their wealth.

However, this is called investing and the price of admission is gut wrenching drawdowns and sometimes years and years with nothing to show for it.

If you can accept that this is the way things work, you can be an enormously successful investor.

4. Finding Like-Minded People Has Made Me A Better Version Of Myself

I’ve always been an avid saver and good with money.

However, it wasn’t before my brother told me about index funds in january 2018 that I’ve started investing myself.

As long as I can remember, my only relationship with stocks was that it was risky.

Scary. Not something for normal people.

Well, that changed.

One thing lead to another and I started a blog.

I’ve meet so many interesting people online.

People I wish that were my real friends.

With these people I can discuss things that really interests me.

There’s a quote saying:

“You become the product of the 5 persons you’re spending most time with”.

I’ve found it to be true.

Because of them I’ve:

-Raised my salary by 41 % in the last 3 years

-Started saving 65 % of my salary every month

-Learnt how to deal with investing risk

They are my friends, my mentors and my inspirations.

If you wonder who they are, just go check who I follow here.

5. You Don’t Need A Degree To Succeed In Life

There’s so many ways to earn money.

There’s more to life than 9 – 5.

I wish I knew about compound interest and investing money when I was 18.

Maybe I wouldn’t end up with a Masters degree.

If I’d started out working some random job at 18 and save $15K/year in average, and then quit at 40 years old, I could have had $1M (10 % interest rate).

When you know that most people have a negative net worth, $1M is an extremely high number.

I’m not doing my job to make a career, I’m doing it to earn the most money I can in the shortest time as possible.

Fuck fancy job titles.

I want to own my own time.

Don’t get me wrong, I love to work.

But I want to work for myself.

6. There’s Too Many Good books, Therefore Read Those You Like

If you don’t like a book, just put it down.

Start a new one.

There’s no need for you to suffer through it.

Speed-read.

Skim.

Take notes.

Skip boring passages.

Do you know how many good books there’s out there?

I’ll tell you how many.

A lot.

You can check out my favorite books here.

7. Classroom learnig < Reading for yourself

Among my frustrations with formal classroom learning is the “ridiculously slow download speed” of sitting in a classroom while a teacher explains something, and to this day, most of what I know I’ve learned through reading.

In most of my mandatory classes in the university I used to play strategy games on my computer or writing on my phone instead of listening to the teacher.

Why?

Almost always I’ve read what he said in the study books the day before.

There wasn’t anything new.

Classroom learning is extremely inefficient.

You could have learned more skills on Youtube in a day than you’ve learned in a month on the university.

I’m really happy to see the digital revolution challenge the current study system.

Think Khan Academy, Udemy etc.

8. Systems > Goals

Now this I’ve learned from Scott Adams ( the Dilbert guy). He said:

“Goals are for losers. That’s literally true most of the time.

For example, if your goal is to lose ten pounds, you will spend every moment until you reach the goal—if you reach it at all—feeling as if you were short of your goal.

In other words, goal-oriented people exist in a state of nearly continuous failure that they hope will be temporary.

That feeling wears on you. In time, it becomes heavy and uncomfortable.

It might even drive you out of the game… If you achieve your goal, you celebrate and feel terrific, but only until you realize you just lost the thing that gave you purpose and direction.

Your options are to feel empty and useless, perhaps enjoying the spoils of your success until they bore you, or set new goals and reenter the cycle of permanent presuccess failure.

Goals still sneak their way into my brain. I try, but sometimes fail, to snuff them out. I am working on it.

There is always that stupid interview question: where do you see yourself or your company in five years. Instead, we should ask, what things do you think are important to do every day?”

The point is that systems lasts forever, but goals are temporary.

I can use myself as an example.

I’ve stated lots of times on this blog that my goal is too reach a $600k net worth in 5 years.

But what happens when I reach $600K?

Nothing.

Literally nothing will change, and as Scott Adams says I may end up feeling empty because I’ve worked so hard at a thing that won’t change anything.

Instead I’ve now created a system for investing.

I invest 65 % of my salary every month.

That’s a habit system I want to continue for the rest of my life.

I don’t think I will have the same savings rate all the time, but I do believe I will continue to invest for the rest of my life.

I believe that there’s a bigger risk of staying outside of the stock market, than to be in it at all times. By creating an investing system, I will not feel disappointed at any time (as with goals), because I’ve followed my principles.

Read my 12 Stock Investing Principles here.

9. Leverage Can Make You Rich Fast, But Make You Poor Faster

I wrote about how stock leverage could make your portfolio increase a lot faster in this post.

I tried it as well in my stock portfolio, but my broker, Nordnet, increased the interest rate in Norway from 2 % to almost 6 %.

It just wasn’t worth the risk anymore.

There is no doubt that leveraging your portfolio is a smart thing to do (in theory).

Most investors that got superrich in their life has used some kind of leverage.

But is it a smart to invest with leverage for “normal” persons like you and me?

Using leverage as a strategy to reach financial independence faster is not for you if you:

-Don’t want extra risk
-Do not have extra cash in backhand in case of a margin call
-Don’t want to lose a (potentially) huge amount of money
-Do not know how to handle your emotions during a market meltdown
-Want a smoother ride to Financial Independence

In general I’m positive to a small amount of leverage ( 1,25 : 1 ) if it is used right and if you’re aware of the extra risk.

I’m not afraid of debt, if the interest rate is relatively low.

I will have debt as long as I can get higher interest rates in stocks, real estate etc.

You can read the full post about stock leverage here.

10. I’ve Learned To Appreciate My Introvert Personality

Five years ago I took a personality test (Myers Briggs 16 personalities) and was litterally shocked by the result.

I was labeled as an INFJ-introvert.

This was a shock because I always was outgoing, social and had lots of friends.

I took the test one more time, because this couldn’t be true, but yet the same result popped up again.

I started to read about INFJ, and soon understood that I had suppressed my personality all my life.

It now became clear as a lightning bolt why I was so extremely drained after all those parties.

Or why I loved to be all by myself as often as I could playing video games after school.

Or why I was extremely careful about money, protecting them like it was my most important mission in life (read more about me here).

Anyway, now I know why I can spend an entire weekend alone without getting bored at all.

There’s so much to read and to learn, that’s there never enough time for me to do everything.


Have questions, comments or suggestions? I would love to help you with your FI-journey.

Feel free to reach out directly at @Route2FI on Twitter or email me at post@route2FI.com


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8 Replies to “10 Essential Things I’ve Learned That Made Me A Better Investor”

  1. Fantastic post, keep them coming! 🙂

    – Nordic Fire

  2. Hi there fellow introvert. I have found being an introvert to be a blessing.

    1. route2fi says: Reply

      Me too! Thank you 🙏

    2. route2fi says: Reply

      Me too 🙂 Which type are you?

      1. I never took the test and always assumed that I would come as an introvert. Surprisingly I am Logician INTP-T. I still feel introvert though 🙂

  3. Hi route2fi, new reader here!
    Point number 8 resonates a lot with me too. I’m a Dilbert fan and his systems vs goals theory makes a lot of sense. I’m also trying to incorporate more “systems” in my life (by means of picking up good habits) and reading that you’re making a habit of investing 65% of your income is already pushing me to think ways I could do the same 🙂
    But then elsewhere on your blog I read that you always want to level up and pursuing the next goal is what keeps you running… I am also like that so I would like to ask you how do you reconcile the two?
    Cheers!

    1. route2fi says: Reply

      Great question, and I’m afraid I don’t have an answer! I’m working on that problem..I always strive for more, because it seems like I’m never content…
      But at the same time I love my life as it is right now.

  4. Hi, 1 yr ago, I quit job. Now lost money in business and stock market. Now financially I can survive only 6 months maximum due to EMI. Still not lost hope. But can you advice something for mental peace. In extreme case, will become bankrupt.

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