Investing in Yourself: Skills, Mindsets, and Tools for Stock Pickers

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2:01All right, folks, welcome to Investing for Beginners podcast. Today, we're going to talk about probably the most overlooked, yet, I guess, rewarding investment that you could make, which would be in yourself. We haven't talked about this before. Shame on us. But this is very important, and this is something that we should definitely do. So today, we're going to talk about a whole wide range of different topics of how you can invest in yourself to become not only a better investor, but also just a better person. So with that, let's go ahead and dive in. So I guess to you, what is the ROI of investing in yourself?

2:37What does that mean? It's such a huge ROI. There are a few things that is tough about our industry, what we teach. It's just hard truths. One of those is you could be the very best stock picker in the world, but if you only have$3 to invest, sorry, you're just not going to build the kind of wealth you're hoping for. So you got to have money to invest. And then alongside that is you have to have skills to invest. Now, one of the great things about investing as a thing is you're basically an investor your entire life. And with the way that life expectancies are these days, a lot of us are going to live for a long time.

3:18So that's a long time to develop our own skills as an investor. And as you become a better investor, you can make better and better decisions. And that stays with you for the rest of your life. I remember one of the oh-duh moments was when I realized when you have this habit where you're starting small and building up your wealth snowball over time, when that snowball becomes a significant size, you've already become a better investor. So it's like, I'm glad I had the skills when I had$100 ,000 rather than$100 I was putting into the market. So it's nice how that kind of works out too. Yeah, it is very nice how all those things will kind of coalesce at the time that you need them.

4:08I think this probably crosses all kinds of different areas. But I think a lot of people, when they think about investing, they think, oh, if I wasn't born Warren Buffett or if I wasn't born somebody like Jeff Bezos, then I can't do this. And that is completely the opposite. Now, can everybody dunk a basketball? Probably not. I know I can't. But there are certainly skills that you can learn to make you a better basketball player as well as make you a better investor. And I think like anything else, the effort that you put into it will compound over time. And like money, your knowledge will compound as well.

4:51A lot of people think when they're born, they're either a good investor or they're not. It is a learned skill. There's definitely, there's mindset shifts. There's mentality of how you think about things can certainly have an impact. but you can learn why this is a good way to grow your wealth. So why do we think that stock investing is the best investment? Of all the choices that we could choose from, why do you think that's the best? That's a great question. At its core, stock investing means being a part owner of a business. And all the great wealthy people that you'll see on the billionaires' lists, they all are part owners of businesses.

5:34So knowing that businesses generate more wealth than basically anything else over a very long time period, that's how it's been historically, that's likely how it will continue to be. And to use our two favorite words, compound interest, it all comes back to compounding. businesses as they grow bigger they have more cash to be able to invest and they can use that extra cash to build and and you see these businesses balloon up and that's what they do and and so our stocks do the exact same thing in ways that bonds or a savings account can't do yes you do get compounding with bonds or a savings account but there's not that active reinvestment that can lead to optionality, that can lead to Amazon being an online retailer, and now it's a major cloud hyperscaler.

6:31Those kinds of things happen when companies invest in themselves. And by the way, when the people who are in those companies invest in themselves as well, you build yourself the skills. You have to put the work, the time, oftentimes the money into things to put yourself in a situation to succeed. But it's by doing those things that you often see these great stories of individuals and businesses that grow in extraordinary ways. Yeah, that is so true. And as I'm doing more and more research on companies and trying to find great investments, you start reading these bios of some of the people that weed some of these companies.

7:15And sometimes it can make you feel like you haven't done anything because they have these amazing track records and these amazing stories of all the things that they've gone through and they've learned and learned and learned and learned. And yes, some people when they're maybe in their late 40s, early 50s can become a CEO of a company and become another CEO and so on and so on. But it's the other 20 or 30 years of experience working and learning in those fields that they build this knowledge. And that's really where they become these great people. So that kind of wants me to segue into what I think we should talk about next is how do we build your knowledge base?

7:57If you're going to invest in yourself, how do you start to build your knowledge base? I've talked about one of the best early investments I've ever made. And it was not a stock. It was a subscription to Audible. Audible is an Amazon product and you can get one new audio book every month. And that has been amazing. And there's something about only having one to pick that makes you a little more intentional with your learning. And I think for me, that was really great. One of my longtime heroes, Pat Flynn, And he's a great podcaster. He talks about entrepreneurship. He talks about just-in-time learning.

8:38And having a path of just-in-time learning is something that can be activated by a subscription like an Audible. So for me, it was turbocharging my learning, especially in a place where, as we've talked about on the show before, I don't have a background in finance. Dave doesn't have a background in finance. We had to learn everything from the ground up. And oftentimes I found myself two years down the line being like, oh, really? I didn't learn that one plus one equals two. That kind of stuff shows up all the time when you're self-taught. But I guess the benefit of that is you start to learn different ways that you can learn effectively.

9:18And for me, having an audible subscription, having a reading habit, for me, it was audio wise, but having that habit really helped increase my skills in a very short time period. What about you? Yeah, I have not been a big fan of listening to books generally. So I prefer to air quote, read them. So having a library card, any city I've ever lived in, one of the first things I always have done is go get a library card because I love to read and I love to read books. I've always been a huge fan of, since I was a little kid, my mom tells me stories of me going to the library and checking out like 12 books and taking them home.

10:04And then I would go down to my room and then I would just sit there and read. And so I've always loved to read. I think any kind of field that you want to get into, there are opportunities to learn and better yourself by reading. There's lots of information that you need to consume to get better at anything. That was a really big, it's always been a big investment for me. And when I lived in Chicago, it was pretty awesome because obviously huge city, huge network of libraries. And once you were part of one, you could go to any of them and you had access to just about anything you wanted. Now where I live, a smaller town in North Carolina.

10:40Yeah, that was a bit of a downshift. I've had to learn to adjust to that. But I think when we talk about specific books or whatnot, I think the library is a great place to go find them. And if you're not a reader, if you're more of an audible person, obviously audible is a great choice, but the library has audio books as well. And you also can get audio books from Spotify. If you have a Spotify premium account, they have books now. And just about all the big name books that you'll come across in the The Investing World, Intelligent Investor, Common Stocks and Uncommon Profits. Those books are available on Spotify.

11:23Another book that I think would be a good one for everybody just in general to help develop better habits would be Atomic Habits by James Clear. It's a book I've read several times and it's a fantastic book. And that is also available in libraries and Audible on Spotify, just about anywhere you find. Those are fantastic places. What are some other tools or places you could go to continue your education, if you will. You could read 10 K's. You could. Yeah. Yeah. That would be, that would be probably the best place to start. If you want to learn how to invest in stocks, read a 10 K. I would recommend not starting with JP Morgan.

12:03If you've listened to the show in the past, that's a, that's a bit of a bear. But pick a company that you know, and you think you're familiar with and read it, read read Walmarts, read Targets, read Starbucks, read Spotify's, read Amazon's. Any of these companies that use their products a lot, read their 10K and you'll start to understand their business model better. If you already use the product, it'll help because you can kind of put together your experience with using the product with what you'll learn in the 10K. And the 10K is the primary source for all investors to learn about what's going on with the companies.

12:39Not only the financials, but you'll also learn what management thinks and what they're doing and how the business operates and any other gobbledygook in the notes section you want to learn. It's all there for the picking. It certainly is, yeah. When I really got serious into reading 10Ks, that's when I feel like I graduated, if you will. I became an actual... And it fits with what we're trying to do. We're trying to own a business for a very long time. So it's very important we know the stocks that we're buying. But yeah, I mean, that was a huge unlock for me. And especially as somebody who's very much numbers driven, I have probably more spreadsheets than most people have, I don't know, like days in their lives.

13:28I don't know. There's a lot of spreadsheets in my various devices. And so I invested for too long thinking that I didn't need 10Ks. If you want to grind and be a numbers person in the stock market all day long every day, there are AIs that will probably beat you now. So you have to invest in a different way and knowing businesses and learning about them and trying to determine which are the ones that are going to stand firm for the long term and which ones are kind of more flash in the pan. That's really when you're becoming a part-time business owner, that's what you're trying to do. What are the businesses that are in an industry that are going to last, that are going to continue being the best businesses?

14:16Because yeah, I mean, sometimes it is the leader who stays the leader, but sometimes it's not. So you really, you can't shortcut the knowledge that you need to build. You can't shortcut the learning that needs to happen in the different industries and businesses that you invest in. Any other, I guess we've talked about books, we've talked about 10Ks, we've talked about YouTube. Anything else kind of jump out to you? Podcasts. Yeah, podcasts. Podcasts. I mean, to me, podcasts are another great way of learning just about anything. Back when Andrew and I started, finance podcast, investing podcast, there weren't a lot of them.

14:58Now there's a lot. And so there's a lot of opportunities to learn a lot of different things. And the thing I like about podcasts is it helps you. I've always looked at learning investing like learning a language. And podcasts to me are a great way to kind of wrap yourself in the cocoon of that language. And so by listening to lots of different shows, even if it's something you may not necessarily be interested in or want to learn about, It just keeps that terminology and the slang and the conversation going in your head. And subliminally, I think that helps reinforce what it is we're learning.

15:38Of course, our friends Brett and Ryan have a great show with Chit Chat Stocks, and there's lots of great other ones. So yeah, I think there's a wealth of information in the podcast world too. Yeah, completely agree. Do you like the whole TV channel, media for learning? i i would admit with with for stock investing i have been less with that of course i i love some of the movies that have come out like the big short for example that's one of those movies if i see it on tv i'm gonna watch it even though i've seen it like 30 times uh i have i have not been a strong proponent of of the tv for stocks but i i could be it's not a hill i'm willing to die on.

16:25Let's just say that. What are your thoughts on it? Yeah. I mean, I agree with you. I, I think there's a lot more harm. You have to be careful when you're learning. There's a difference between learning that feels productive, but really was wasted and learning that's actually foundational. I could jump on a soapbox about that if you guys want, but I'll refrain. But But consuming news and these endless news sources does not teach you anything. And I think a lot of the TV channels cater to that because I think that's their business model. But it doesn't teach you much. You read a book and you read a book that has foundational principles.

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19:27Download my ebook for free at stockmarketpdf.com. Yeah, totally agree. Maybe we should talk a little about developing the mindset to be a good investor, like your emotional IQ and how to handle things not going well and how to handle things when they are going well. Maybe we should talk a little bit about that. What are your thoughts on emotional IQ? You want to ask me about emotional IQ? You sure about that? What are your thoughts? my thoughts are that i think emotional iq has a big big bearing on how well you do in life just as a general rule if you go through life looking for negative things i think negative things will find you and it doesn't mean that you know if you're all happy sunshine that bad things can't happen to you of course they can but i think how you how you frame what's going on in your life and in the world will have a bearing on the output that you put into the world.

20:34And so if you go into an activity or a job or a learning environment and you're not in the right mindset or you're in the, this is, I'm never gonna be able to do this or this is too hard or I'm not smart enough. If you're already beating yourself up, you're already gonna be, it's going to be a struggle. But I think if you go into it with the mindset of like, I can do this. And even if I don't get it at first and I keep trying, you will figure it out. You will succeed. Who here has taken algebra and thought, I can't do this. And by the end of the year, you can do it. And so it's just a matter of continuing to work at something.

21:21And I think if you have that idea in your mind already, then I think you can learn anything that you want to learn and you can improve not only in your job, but in your relationships with your family and your friends, your loved ones. If you have the right mindset, I think you can do just about anything because I think our emotional IQ controls a lot more than we probably think it does. that mentality of like i'm not going to give up even if it gets hard i think that's a really really valuable trait to have or develop in yourself i was talking to one of my kids the other day and i said in college i noticed the most successful kids who got highest grades would go to office hours and go like you would get the lecture and you try all you can to try to process all the information you're getting from the professor but there's something else to be said about going in person and trying to further your knowledge in that way and getting that interaction and i use that as an example for if you don't understand it at first keep working at it and and you can eventually understand it the smartest people in the room aren't always the ones who succeed because a lot of it is just continuing to push through hard things because smart people are lazy too so they want to quit just like you do but if you can be the one who's going to push past the suck you can get really really far and I think that applies to investing as well yeah totally does I mean I if you look at the pushing back past the suck in in exercise if you push past the suck then it's a lot easier to get to where you want to go is it easy no sucks it's it's why they call it the suck but i think that's the if you see the people that show up to the gym you know consistently those are the ones that eventually will see the gains because they're pushing past the suck and they're continuing to work hard and that's how they can get that and it's the same idea applies with investing you can push past the the the suck of you know yes learning accounting can be boring but it's part of investing and if you don't understand accounting it's harder to understand the financials of a company and it's a lot harder to invest and if you can push past that part and work hard at it then you'll get to where you want to go and you'll become a better investor yeah totally whether whether some other key mindset things that you think a successful investor should have?

24:10Humility. I think you need to balance. There has to be a balance between confidence and humility. It's hard to do. And I think if you look on social media, you can see examples of the extremes. You can see the uber confident people that have little to no humility. And then you can also see the people that are kind of pessimistic and have maybe too much humility. And I think you need to find a balance between the two because you have to be confident that you can find something that you think will work for you to find good investments. But you also have to understand that you could be wrong. And in some cases, you will be wrong.

24:54And it's part of the game. There is no investor that has ever gotten 100 % right. And every single person out there, whether they'll admit it or not, have made mistakes. They have chosen companies for the wrong reasons, or they drank the Kool-Aid too much, or they looked at something incorrectly, or they just misjudged maybe the quality of the management, for example. It could be a myriad of things. But the one thing that you'll learn very, very fast in the market is that it will humble you very, very quickly. So as soon as you think, hey, I got this whole investing thing down, this is easy, the market will stand up and smack you in the face and show you a 30 % drawdown on your whole portfolio.

25:40And so I think you have to learn to strike the balance, to be confident that you know what you're doing and that you can learn and you can become better, but have the humility and humbleness to understand that you will make mistakes and try to learn from the mistakes. And I think if you approach it that way, I think over the long run, you'll be successful. And I think that applies to anything in life. And we're talking more investing here, but I think that applies to anything in life. I distinctly remember in college, I was already a humble person, but if I wasn't, this would have been a shock, going to try out for my college baseball team.

26:18And everybody there was bigger, stronger, and faster than I was. And we are all trying to walk on to a college team. And it was humbling to see these guys that were just amazing athletes, bigger and faster. And like, how can I compete with these guys? But I tried. And it was a great experience, but it was also very humbling. It also, it opens your eyes that whatever little sand pile or whatever, you know, pond you're swimming in, you may be the biggest fish there, but you go to another pond, there may be other bigger fish. And so I think if you have that humility about, yeah, I'm good, but I also understand there will be people better, but it doesn't mean I won't keep trying.

26:59And I think if you approach it with that idea and that mindset, I think you can be successful. I love that. Yeah. Completely agree with that. and you'll just make better decisions if you're having that humility and saying, where am I wrong here? How can I do more work to figure out where my thesis is wrong, where my logic is wrong and where I couldn't improve as an investor? That can all be opportunities for growth rather than just thinking you have it all figured out and you're just going to stay stagnant and we all know what happens when you do that. One last one I'd like to throw on top of that.

27:38I think patience. This is hard. I struggle with this. Maybe not so much in the stock market, but just in life, it's very hard to be patient. We all know that. And I don't know if I have a great antidote for that. I'm sorry. But if you want to be a good investor, you need to learn to be patient because a great company or a great stock might grow at 11 % or 12 % a year. If you think about the magnitude of what that means, that's almost like watching paint dry because you have to wait six, seven years for the money to double. And then you look on social media and people are allegedly doubling their money in 60 seconds or whatever it is.

28:23Once you get down that trap of being impatient in the stock market, you start to take unnecessary risks. you start to jump into things you don't understand and you don't really enjoy the process i don't think i think a lot of the fomo drives a lot of dissatisfaction and so it's like this double-edged sword of dissatisfaction and also poor investing results so if you can master patience and um yeah i'd love to if you have like recommendations for that but just being patient with your investments, you're going to be a better investor doing that. Cause then it also changes what kind of opportunities you look at as much as people might hate hearing the Aesop's fable of the tortoise and the hare.

29:13There is a lot of truth to that in the business world too. So it is an important thing to learn as an investor. Yeah, it's a very important thing and it's, it's a hard, it's a hard lesson. It's a hard trait to, I struggle with patience as much as the next person. I get in a car and I become the most impatient person in the entire world. I can sit on a stock forever, but if I get in a car, then it's like, you know, all bets are off. So I think for me, I think the way you can develop some patience is understanding who and what you are as an investor and trying to play the game that you are best suited to play.