6 investing lessons I learned in kindergarten

These pieces of advice I got from my mother at age 5 completely changed my life.

By InvestingAnswers Oct 14, 2013 1:22PM
Image: A green chalkboard with the alphabet written on it © Ocean/Corbis /CorbisBy Michael Vodicka                                                           

When I went to kindergarten, it didn't take me long to get in trouble.

At the very first parent-teacher meeting, my mother was informed that I was quite a little talker in class. My teacher said I was a happy and mostly well behaved 5-year-old, but I needed some work on knowing when to keep my mouth shut.

But when my mom came home to share the review, she didn’t come crashing down on me and demand I transform into an anti-social hermit. Instead, she simply told me, "if you're always talking, you'll never be able to hear what anyone else is saying. Particularly your teacher."

It was a simple but powerful lesson about the value of listening. My mom knew that learning to listen and absorb information from other people around me was the key to my success at school.

But that advice didn’t just propel me through grade school, high school and college. It has also made me a better investor. Being a good listener has enabled me accumulate a huge wealth of knowledge about the market and investing that I happily share with readers and clients alike.

Here are six other lessons I learned in kindergarten that can have a big impact on your investment process and results:

1. Be patient. 
Just like a good finger painting doesn’t come together in five seconds (or in the case of investing, five months), success as an investor is a long-term project that requires commitment and dedication. Nothing worth any value comes quickly, so taking the long-term view with investing is the best way to avoid short-term frustrations.

2. Stay in line. 
The market is built on chaos. But when it comes to your portfolio, structure, process and order are the keys to success. Straying too far from the S&P 500 and taking on too much risk can lead to sharp performance divergences. Building a strong core of low-cost index funds in the S&P 500, Nasdaq 100, mid caps and small caps provides a solid foundation for investors looking to track equity-market returns and reduce expenses.

3. Share. 
A good friend of mine started an investment club a few years ago. The group meets once a month on Thursday night to eat dinner, hash out their best investment ideas and share thoughts on the market. No one at these meetings is trying to be Joe Hedge Fund, but by sharing their passion and interest in investing with each other, each member has created a platform to grow their investment knowledge and improve their results.

4. Pick your friends wisely.
Successful investing requires the right partners. At the top of that list is a good investment advisor, an incredibly powerful resource with the insight to help clients dodge unnecessary fees and develop customized portfolio strategies. Picking the right brokerage firm is also key, where investors have a large universe of specialties to choose from that include full-service, discount, online and more. Picking good partners will have a big influence on the success of an investment strategy just like avoiding troublemakers will keep you out of the principal’s office. 

But the ultimate friends to have may just be the "stock gurus" like George Soros, Carl Icahn and Bill Gates, and they are now within the reach of ordinary investors like us. That's because my colleague Michael J. Carr has figured out how to leverage the holdings of over a dozen legendary investors to easily beat the market. . . or even the "gurus" themselves. (Check out his free webinar on the subject.)

5. Keep a positive attitude. 
Even the best and most successful investors have setbacks. The only difference between the winners and losers is how they respond to that adversity. Making a bad investment or having a tough year doesn’t mean it’s time to quit or give up. But investors who focused on the big picture, stayed optimistic about the long-term picture and kept making monthly contributions were able to buy lows and eventually saw big gains by capitalizing on short-term volatility.

6. Take recess and nap time.
Sally Krawcheck is nicknamed the Queen of Wall Street. The former president of Bank of America’s Global Wealth and Investment Management Division testifies to the power of hard work. But in a recent interview with LinkedIn, Krawcheck also noted how important it was to take breaks, saying that her best work frequently comes after 30 minutes of playing with her daughter and putting her to bed.

The Investing Answer: When it comes to investing, keeping it simple can bring big benefits. Investors don’t need to worry about every nook and cranny of the market, company or stock. Focus on the big picture.

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8Comments
Oct 14, 2013 2:24PM
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I like to especially emphasize numbers 1 and 5 to my friends and relatives.  Patience and a positive attitude will keep you from jumping in and out of the market!  Remember --- a loss is not a loss until it is a SALE!  It may come back up soon.   And, in any case, will usually continue to pay nice dividends if it was carefully researched and chosen!  
Oct 14, 2013 3:33PM
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Most Parents and Schools will never teach you anything about investing and or how to avoid Debt issues.  Handling your Debt issues is far more important. Hard to really invest if you are spending everything toward bad debt. It's hard to be a successful investor if you never can get your DEBT issues under control and free up investment savings.

Ever Notice how some folks win the Lottery and or Play Sports yet are broke so quickly. So first things first, learn to control your spending and stay away from the Keeping up with the Jones. Of course, diversifying your skill sets always helps. Being a one trick pony can trap you longer term. Skills sets by the way, which are not only in demand now, but are so in the future.

Once you have put away enough CASH for a Rainy Day and have in place sound Discipline in dealing with everyday finances, only then can you start to consider investments. First rule is this, YOU CAN LOSE YOUR ENTIRE INVESTMENTS IN STOCKS. Don't let folks try to scare you into stocks. You are not in some freaking Contest to prove yourself to others. It's your Life, not theirs.

Education, the more you read and understand about Stock Markets, the more informed choices you can make. Are there folks that are a Natural at it, sure. However, don't ever rely on you being so lucky. Never stop educating yourself about the Markets. Admit that you can be wrong and admit that you made a mistake. Nothing wrong with correcting mistakes. However there is totally something wrong in turning a minor Mistake into a far bigger one.

The Bigger the Risk, the Bigger the Reward, the bigger the possible failure. Understand what the risks are before you leap. IN the end, no broker, posters, or Website will refund money lost in the Stock Markets. You have to live with your choices, not them. What works for them, might not work for you. At the end of the Day, NextTimeUp made one very important observation, Capital Preservation.

Oct 17, 2013 9:56AM
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I'm not sure I could relate much back to Kindergarten, but the advice is good.  The key is to not relate your investing practices to daily market swings.  You use a systematic investing principle which is to invest the same way no matter what the stock market is doing.  You will come out ahead in the end, but this is a long-term strategy not a get rich quick scheme.  It requires discipline and vision for your financial future.  What do you want out of your retirement?  Are you willing to make the sacrifices necessary to build a retirement fund?
Oct 15, 2013 10:01AM
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I find it very difficult to have a gain of 10% "across the board" in dividends, and still be diversified.?

 

With the mixes we have, it's comfortable to realize maybe up around 6%, even close to 6.5-7% on a stretch....But going much higher, always seems to lock you into a few or couple Sectors..

 

There may be some hi-flier MFs that can offer higher paybacks, but again the "specific sector syndrome".

We don't invest in MFs nor ETFs....So maybe we should ??

But am happy with our diverse selections of about 20-25 positions.

Oct 14, 2013 1:31PM
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The Only way to LEARN....

 

Talk, ask Questions, Listen..

 

Never,never keep your mouth shut.

Oct 14, 2013 8:36PM
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