TLDR: Financial education, lack of formal training, not school level or college level courses.
Let us be honest with each other. Don’t you wish you had known what you know now, some 10 to 15 years earlier? If only we can go back in time and advice our younger self on all the things that you could have done better or differently?
No, i am not talking about giving stocks tips to your younger self to go buy Apple, google, Amazon or in the Indian context Infosys or HDFC, even though that would have been great too.
I am talking the strength of compounding and the benefits of investing, instead of trading and the obsession with real estate. I have spent a good number of years trading before I discovered the fundamentals of investing from the gurus and revised my ways to reflect that. The strangest thing is, each generation it seems goes through a similar cycle in their financial journey. The steps looks something like this on your investment journey
Complete their education
Join the workforce
Discover the stock market
Buy and sell - daily, weekly or monthly for small gains
“Invest” in ULIPs or other investment linked insurance products
“Invest” for tax savings
Discover options and futures
Get into currency / crypto (add the latest fad here)
Lose a bunch a money
Start reading the investment gurus
Try to emulate one
Read more investment books and gurus
Realise that there is no perfect investment style or philosophy
Develop a plan that is aligned to your personality, temperament and risk profile
Fine tune the investment style for the next 3 to 5 years
Wish someone had told them on how to reach step 17 directly
This cycle seem to repeat for everyone give or take a few steps. Wish it had not taken me 12+ years to get here.
What can be done differently
The educational system needs to be updated to reflect the reality of financial system and markets. Be it in school or college there is no coverage on how to manage your personal finances, investments, Insurance. Nothing of that sort, i don’t know if it has changed recently but I am pretty sure it hasn’t in India.
Wishing for a change in the education to include additional topics in the slow moving pace of the Indian education board is as good as buying a lottery ticket and expecting to become millionaire. It is theoretically possible but the odds are definitely stacked against you.
What can you do?
Start with the next generation, your kids, nieces and nephews. Teach them the fundamentals of money, saving, investment, charity. The ideal age for them to learn these concepts would be when they reach teenage years, but nothing stopping you from starting earlier if the kid shows interest. It is not going to be easy, they have the attention span of gold fish and stock trading and investments are not exactly the most interesting of topics for them.
I also wish there was an easier option to gift kids stocks or mutual funds or indices as birthday gifts that compound in value over the long term. They can see the value of the funds growing every year and potentially they would want to learn how it all works. One can always dream, can’t we?
Do you have any thoughts on your investment journey? Advice for the next generation. Leave your comments below.
Happy Investing - #MyFatFIRE