Overview – Investment Education and Reading
Any sort of investment education program will almost always include some form of reading. After all, reading and education are closely related – whether you’re a student or you’re just trying to learn something new, it’s only a matter of time before you eventually need to read something to advance your education.
There are countless resources for investors to read and learn from. At the time of this writing, there are more than 100 articles here on ilucidy that are free for you to access, all with the purpose of advancing your investment education and continuous development.
No doubt, reading is the foundation of any strong education – no question there. However, as you may know from your own educational experiences, any good education program involves both theory and practice.
If you want to learn math, it’s not enough to simply read your textbook – you’ll need to work on practice problems to truly solidify your understanding of the topic. Naturally, investment education also needs a balance between theoretical knowledge and hands-on experience.
Reading Serves as the Foundation of Investment Education
Anyone looking to start learning about investing will eventually encounter written text in one way or another.
There are countless ways to learn about investing nowadays: videos, podcasts, simulators – the list goes on and on. However, some of the true gems of investment knowledge are tucked away behind the pages of a book.
The Intelligent Investor, Security Analysis, Learn to Earn, Margin of Safety – some of the most influential works on investing crafted by some of the most skilled investors in the world are in the form of books.
Therefore, it should come as no surprise that reading and investment education go hand-in-hand. Even if an investor-in-training doesn’t like to read, they’ll be surprised to learn just how much investment information is presented in written form.
Annual reports, quarterly reports, proxy statements, press releases – so much high-quality information is presented as written text. An investor must learn to sharpen their critical reading skills and the ability to read between the lines if they want to extract any sort of insight from these documents.
So, reading serves the dual purpose of helping investors progress in their investment education and to extract the information they want from important documents.
By this logic, the only thing an investor needs to do to become better is to read as much as they possibly can, right? Well…sort of.
Combining Theory With Experience
Reading is important, no doubt, but as was mentioned in the introduction, reading is only one part of a holistic investment education – the other half is hands-on experience.
In fact, I’d say that an investor’s education is incomplete if they don’t have any sort of experience whatsoever.
For example, imagine you want to learn how to swim.
You can start learning about swimming by reading up on some basics such as breathing, floating techniques, and even some simple movements like the breaststroke. Maybe you watch some videos on how to do the things you read about.
However, there will come a time where you will eventually need to be in the water to get a feel of what it’s actually like to maneuver in the water.
You can consume as much content as you want regarding swimming, but all your theoretical knowledge is useless if you don’t put it to work in the real world.
The same learning process applies to investing. Many investors-to-be start out by establishing their theoretical knowledge first, but eventually, they need to make their first investment and make their own decisions to understand what investing is truly like in the real world.
Gaining hands-on experience is so invaluable because it helps close the gap between theory and reality. If you’ve experienced this gap before, then you know exactly what I mean.
Most of the materials used in investment education are presented in a very idealized manner, understandably so.
The examples used throughout the Investing and Investing: Special Topics articles here on ilucidy are relatively simple. This simplicity is a conscious design choice – the point of these articles is to help you understand major concepts, and the examples serve to clarify these concepts by presenting very idealized situations that are relatively easy to understand.
However, to really understand how these concepts work in the real world you need to gain first-hand investment experience. The articles and consulting service here on ilucidy can only do so much, but eventually, you need to try things yourself as well.
If your investment education is limited to understanding the theory and not seeing how the theory holds up out in the field, you’re only doing yourself a disservice by widening the gap between theory and reality.
Theoretical knowledge and first-hand experience go hand-in-hand. An investment education program that contains one element but not the other is, in my opinion, inherently flawed.
Experience Validates the Theory You Learn About
You’ve probably heard it said before that “experience is the best teacher”. When it comes to investing, this is definitely true.
Now, don’t misunderstand me. I’m not advocating that all somebody needs to do to learn about investing is to go and learn by trial and error. Investment mistakes cost time and money, so it’s best to keep your investing mistakes to a minimum.
What I’m saying is that supplementing your theoretical knowledge with experience will help advance your investment education significantly.
By gaining first-hand investment experience, you quickly learn what does and doesn’t work in the real world. Maybe a certain analytical approach you read about isn’t as effective when you try it yourself, or perhaps an investment concept you read about is hardly observed in the real world.
By putting your theoretical knowledge to the test, you are essentially validating whether the things you read about, listened to, or watched are accurate or not.
Before performing my own investment analysis I thought the task was easy. I learned that an investor simply needs to gather the necessary materials, go over the materials, then make a decision – or so I thought.
When I started doing my own investment analysis, I quickly learned that it wasn’t as easy as the books I read made it out to be.
As a result, I adjusted my analytical style in a such way that my work is still reasonably high-quality without having to spend an exorbitant amount of time performing analysis. I continue to adjust my analytical style as I come across new companies to look at.
I never would’ve learned how difficult investment analysis can get had I simply decided to read more books or watch more videos.
Theory and practice are two very different domains. Just because you read about something in a book or learn something in a seminar doesn’t mean it’ll hold up in the real world. The sooner you validate the theory you learn, the better.
The Million Dollar Question: When Do I Start Investing?
If excellent investment education is comprised of both theory and practice, this inevitably leads to the question of “when do I start investing?“
I’ve spoken briefly about the “perfect time” to start investing in The Stages of Investor Learning and Is It Possible To Start Investing Too Early?
This question is so difficult to answer because, as much as I abhor this answer, knowing when to start investing varies on a case-by-case basis.
In my case, I started learning about investing in 2014, then made the jump in late 2016. It took me 2.5 years to make the leap because I was still a high school student and getting into university was my highest priority, so I only studied investing whenever I had the chance to do so.
If I had more time to spare, I estimate that I would’ve started investing after one year of investment study, but that’s just my best guess.
Clearly, there is no easy answer to this question.
Everyone learns differently, and everyone has varying levels of confidence when it’s time to take a leap of faith. So, the last thing I want to do is tell you when the “right” time to start is.
What’s important to remember is that there will never be a “perfect” time to make the leap from investment theory to practice. When your gut tells you to start, then it’s time to start.
If you wait for the “perfect” time to start, you’ll end up waiting your entire life.
I started investing not because I knew everything, but because I felt it was the right time for me.
It’s important to remember that an investor’s theoretical education doesn’t stop just because they manage their own portfolio now. I’m still learning new concepts even though I manage my own portfolio and make my own investment decisions.
Wrapping Up
Reading is central to any investment education program, but theoretical knowledge can only take you so far.
Eventually, you need to gain first-hand investing experience to complete your investment education, and to validate whether the theory you learn is applicable to the real world.
Making the leap from theory to practice is never an easy call, and as a result, there’s no universal answer for the “best” time to start.
When your gut tells you it’s time to start investing, then chances are that’s the best time to make the leap.
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