THE NEW INVESTOR

A step-by-step guide to investing for well-grounded people. My fortnightly (bi-weekly for American readers) letters will take you from beginner investor to managing your portfolio well by the end of the year.

KEY TAKEAWAYS

Understand why you should invest and the role inflation plays in eroding your money’s value.

See the simple roadmap to getting started with investing.

MONTTY’S RULE #1

You invest to preserve the longer term value of your money .

CHAPTER 1

The story as it is told

It’s not far fetched to imagine that when most people hear the word investing, it isn’t a feeling of comfort that washes over them but dread, or disinterest or schendfruede. We know the horror stories. We have seen them immortalised by Hollywood: The Wolf of Wall Street, Margin Call, The Big Short, Inside Job.

The way this information is presented to us makes it seem like the preserve of folk in ivory towers looking down their bridges at the rest of us ‘normal’ people. Some of that is true, but that is not the real story of what investing is.

Investing supports our economic system. Supply, demand and the activities we participate in that keep the system churning. An approximation for this could be:

1. You invest in stocks

2. The money invested is used to build factories, stores etc.

3. Jobs are created as a result of this

4. The workers in these jobs earn a salary allowing them to save and invest

5. The cycle repeats.

The immediate challenge is that this view is idealistic in the context of a globalised economy where our pounds or dollars can’t always be directly traced to factories (etc) in the country you live. That (in my opinion) is the difficulty in using the economic system to make a case for investing.

A better one might be where the benefits are tangible to you. That argument says that.

Investing allows you to build wealth over time by keeping you ahead of inflation curve.