Warren Buffett once said, “in order to succeed, you must first survive.”
I see this on a regular basis with individuals that want to get started investing. I am always excited to hear about how they are navigating this new stage of life, but often get concerned about the approach being taken.
Although the straightforward ways of index investing is becoming more and more mainstream, there is still a desire to brag about investments to friends and colleagues. In my opinion, investing shouldn’t be a form of entertainment, it should be viewed as a way to secure your financial future.
Typically, I will get asked what I think about the current stock market valuations, a certain company’s stock potential, investing in real estate, investing in cryptocurrencies, and more. I am always happy to have the conversation, but I will try to point the individual in a more reasonable and sustainable approach, like long-term index fund investing.
When just getting started investing, taking large amounts of risk won’t provide what you ultimately need for a secure financial future. After all, if you are fortunate enough to double your $1,000 investment, you still have just $2,000.
At a certain point, you realize it’s extremely difficult to constantly try and time the market or find new investment opportunities. Life happens and you’d rather have a more automated system.
Make sure you have all of your financial affairs in order first, like paying off debts, building up an emergency fund, insuring against the loss of income, and fully funding your retirement accounts.
After you have the basics down, then it may be more appropriate to take on additional risks in hope of hitting it big.
Survive first, succeed second.