As investors, our investing knowledge accumulated over many years is a very valuable thing.
Investing experience can help to guide your decision making, during the good times and the bad.
Investing knowledge and insights, can keep your mind open to investment opportunities, and allow you to quickly gain a deep understanding of an investment which is sitting in front of you, awaiting evaluation.
When it comes to evaluating investments, you can compare the characteristics of current opportunities, to those you have accepted or turned down in the past. With the benefit of hindsight, not all of those past decisions will have been correct.
But you can be sure that with each investing mistake, you have logged a very permanent record and a reminder of what you would do differently the next time the same circumstances presented themselves.
Investing books versus financial advisers
Financial advisers and the best investing books are fixed costs – their price doesn’t really change over time or with increases in volume. It doesn’t matter whether you read 10 investing books per year, each of those books will probably cost the same as anyone else would pay.
Likewise, if you consulted with financial advisers and changed your portfolio 4 times a year, you can expect that this would be four times more expensive than doing this once per year.
However, the value proposition of each of these sources of investing information does change. This means that the decision between which of these is the superior vessel of knowledge may flip from one answer to another as you move through your lifetime.
As an investing novice
When you are brand new to investing, all the books in the world cannot give you one thing: experience. And for some people, particularly those who are risk averse and don’t like to risk their capital in order to pursue gains, without experience on the tables, they will never feel that investing is the right decision.
This is where finding the best financial adviser would make all the difference. A financial adviser will come with boatloads of wisdom and confidence. This could fit the needs of a novice like a glove, giving them a firm steer towards their first investment decision and first investment portfolio.
Training wheels are off
However, after a few years of having an investment portfolio set up by a professional, and investor will have accumulated wisdom and experience of their very own. After 10 years, they will have certainly experienced a financial crash in the stock markets.
This can be a very tough experience for any investor, but it’s particularly hard for new investors, who have no memories of getting out of a crisis to keep them hopeful. Of course, these moments are again where the comforting words of a financial adviser can give the investor the strength to stay in the market and weather the tough periods to enable them to unlock the full long term returns of the stock market.
But with that experience in the bag, an investor may begin to realise the simple truths – that you don’t need a bachelor’s degree in finance to be able to create and monitor a very simple investment portfolio. And the second truth – that a basic investment portfolio will be just fine for most modern armchair investors.
With this context, investing books really come to their own. General ‘reference’ style guides and comprehensive books for beginners can be used to fill in gaps in the investor’s knowledge. Perhaps they’ve heard of bonds and equities before, but they weren’t quite sure of the science of why financial advisers combine these together in portfolios in the way they do.
With these gaps filled, an investor may feel that this is all they need to go over the top for a second time and make their second major financial decision – to go it alone and invest independently from now on.