3 Investing Lessons from Breaking Down Walls
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While I enjoy brushing up on finances with a good book even now again, I also love reading beyond the numbers.
I finished reading Breaking Down the Walls and it is one of those books that make investing fascinating and part of it is the perfect mix of memoir, money, and history.
It’s a new memoir from Norma Yaeger, founder of both Yaeger Securities and Yaeger Capital Markets. She had spent several decades in the investment business and has a number of gems and stories to share in her book.
I want to share a few investing lessons and highlights that I enjoyed.
Your Money, Your Choices
While it's understandable to want to get information from others about investing, in the end it's your responsibility to stay on top of your money. Many of us work hard for our paychecks, so it makes sense we want our money to work for us.
Yaeger does a wonderful job explaining how you have the ability to manage your investments wisely even when there are some brokers in Wall Street who tell you otherwise.
Investing Versus Trading
Yaeger succinctly explains the two schools of thought when it comes to the stock market: investors and traders.
Investors are those looking at the big picture and willing to hold on to their investments for years. They will carefully research every purchase they make. The noise of most financial/stock market show and columns is ignored.
Traders on the other hand are looking for the quick turnaround. Their main focus is the stock price.
While day trading may seem like an exciting way to make quick profits, it is generally considered to be riskier and less effective than long-term investing.
The Power of Playing the Long Game with Investing
One of the main reasons why long-term investing is often preferred is that it allows investors to take advantage of compounding interest.
Over time, the returns on a long-term investment can grow exponentially, as the interest earned on the initial investment is reinvested and continues to earn interest. This can help investors achieve significant gains over the long-term.
Another advantage of long-term investing is that it allows investors to avoid the stress and uncertainty associated with day trading.
Day traders must monitor the markets constantly and make quick decisions based on often volatile market conditions. This can be extremely stressful and can lead to poor decision-making.
In contrast, long-term investors can take a more measured approach, including diversifying their investments and holding them for extended periods of time.
Finally, long-term investing can also help investors save money on taxes. Short-term capital gains (gains on investments held for less than a year) are typically taxed at a higher rate than long-term capital gains.
By holding investments for the long-term, investors may be able to reduce their tax liability and keep more of their profits.
Overall, while day trading may seem like an attractive option, it is generally considered to be a riskier and less effective strategy than long-term investing.
Treat Investments Like People
I love Yaeger's idea of vetting investments by getting to know the corporations you invest in.
Many times, personal finance magazines, shows, and websites give a few superficial numbers about a ‘hot' investment to entice people to buy, but true investing involves more. It's about become familiar with how the company is operated and discovering their financial health.
Even if you choose to invest in index funds, make sure you understand what you're investing in. What fees are involved?
Thoughts on Breaking Down Walls
I thoroughly enjoyed reading Breaking Down the Walls. There is more to her book then investing advice.
There are some wonderful nuggets as Yaeger was able to clearly explain the differences between the markets then and now while sharing her insights on the investing in an engaging way.
