Is Value Investing for the Old?
Full house session!
Had a great session of conducting the Value Investing Accelerated Programme last weekend, and I’m so glad that some of my friends came to visit!
We went for a good meal after the programme and began chatting. Of course, when you are around me, it is inevitable very likely that I will talk about finance stuff especially investing.
One of them exclaimed that “Hey, most of your audience are middle aged or older! Is Value Investing for old people?”
And that’s the topic for today’s discussion today and I want to give my most honest opinion here. (Be warned, truth hurts)
The Best One amongst Us
Let’s start with Value Investing. It is essentially buy good companies at undervalued prices, and sell them when it is overvalued by the market. Plain and simple.
However, there is a caveat.
The Market does not listen to us
The first part of the equation “buy good companies at undervalued prices” is something we can control. You know how to identify good companies then you can go and buy it when it is undervalued. But the second part of the equation “sell them when it is overvalued by the market” is beyond our control.
While we are confidence that the market will eventually value the good companies at their actual value, we DO NOT know when it will happen.
This means you need to have the ability to hold on to the companies’ share and wait for it. And the wait can be months or even years.
So back to the question of “Is Value Investing for old people?”, what do you think? Who has more time on their side?
Source: Tumblr
An average market cycle is about 8-10 years. If you are 30 years old, time is on your side! You can go through at least 4-5 cycles before meeting your maker(provided no major health issues now). But if you are 60 years old, you can only see through another 1-2 cycles.
Therefore, in my honest opinion, Value Investing is for young people! The younger the better!
If you are quite aged like 60 and above, you may not be very suitable for value investing as you simply don’t have much time left. Income investing might be more suitable. And I share this quite openly with people around me too.
Then you may ask, “In that case, why are most of your students middle aged or older?”
The simple reason breaks down into three As: “Awareness, Acknowledge, Action”
First and foremost, you need to be aware of value investing and the truth about it needing time to work its miracles. Then, you need to acknowledge that you NEED value investing (value investing doesn’t need you). Finally after acknowledgement, you need to take action!
Awareness is fairly easy to achieve. You can achieve awareness by learning it either from a teacher or the Internet (everything is on the Internet these days). Taking action is also relatively straightforward after acknowledging that you need to invest.
Youth is often wasted on the young
The elusive part is “Acknowledge“. It does takes a lot of real life experience and conversation before someone finally accepts the fact that he needs to invest his money else it will erode away. However, most young people do not have the luxury of experience. They often live by the moment, seize the day, and believe they are impervious to financial matters. Heck, they may just think that finance is so boring and silly. They are interested in exciting or simulating activities like Pokemon Go or Snapchat. Afterall, if you are earning a comfortable pay that covers all your expenses and needs, why would you be thinking of investing?
The same group of young people will only realise the reality of life as they get older and have more financial commitment. A house, children, insurance, groceries and maybe even a car. Only then, they would acknowledge that their current wealth is not enough. They can’t rely solely on themselves to earn money, their money must make more money! Essentially, they finally acknowledge that they need to invest.
So yes, this is the main reason why most of my students are middle aged or older. Some of them even shared that they knew Value Investing years ago but did not think that they needed it back then.
Of course, you didn’t need it back then. Because it is your future that needs it. So don’t make the same mistake, start investing now!
Source: kvibe.com
See you soon!
Investing Always,
Pete
