I have always been intrigued by attempting to predict the future and create something from nothing. This is found, not to the full extent, in investing.
Investing is a fundamentally creative, ever-changing game that can fit different styles and appetites for risk. It is also an occupation that anyone can begin but still challenges those who have been doing it for decades on Wall Street. With this, investing is fun!
Competing against market averages, other investors, and most often, your past returns, investing is a game. This game is defined with the common goal of assessing the financial markets to grow wealth. But what makes investing exciting is that there are infinite ways to both achieve this goal and lose all of your money. Moreso, investing is not limited to trading securities, but can be broadened to owning real estate properties, collecting stamps, trading currency pairs, and much else.
Now, to analyze the market value and conditions of assets, investors use three methods or more often than not, a combination of them. These are fundamental, technical, and quantitative analysis. Briefly, fundamental analysis is concerned with why the price is what it is while technical and quantitative analysis are concerned with what the price is. To accomplish this, the fundementalist needs to have a broad understanding of business, history, environmental, social, and political factors. While on the other hand, the technicians and “quants” utilize a combination of mathematics, psychology, economics, and computer science to predict the price action of an asset.
Investing, requiring a broad, up-to-date knowledge base, creates a game that is never the same. Each day, there is more knowledge for the individual investor to digest and understand. A successful investor must have a broad knowledge base themself or be a member of a team with an extensive cumulative knowledge base. This is related to the “T” theory of knowledge that I first heard from author and entrepreneur, Tim Ferriss (YouTube). To explain, one should have a broad, general knowledge (that is the upper horizontal line of the T) and a deep understanding of a specific field (the vertical line of the T). This general knowledge allows the individual to create new insights into a specific field, in this case investing.
But, circling back to investing never being the same, experienced investors actually understand that history tends to repeat itself. The challenge then is to decipher the current state of the market and apply it to a past event. Still, this requires an extensive knowledge base of historical events.
Now, because investing is a constantly evolving game with financial rewards, it is fun! Also, it is easy to begin investing today but nearly impossible to master. Investors who have worked on Wall Street for decades are still challenged and faced with new situations.
Investing is a dynamic culmination of many intricate fields. There is always more to know and more money to be made. Have fun and build yourself a better financial future!