My father is not an investor or “bank guy” by any means. But thinking back upon childhood and beyond, I realize that a good amount of the things that are important to investing, are the same simple life lessons my father tried to instil in me when I was young.
They are tidbits of wisdom that seem to have limitless application. Here’s a few that come to mind:
Use the right tool for the right job
Whenever my dad caught me trying to hammer something with the handle of a screwdriver, or unscrew something with a butter knife, he used to stop me and tell me to use the right tool for the right job. Taking the 30 seconds to grab a hammer was far better than breaking the screwdriver and being out the time and money that it would take to replace.
The same can be said about investing. We have a variety of products we can choose from, and several of them have their specific purpose. Use a TFSA if you want to save up for a car, not your RRSP. Use an RESP to save for your child’s education, not your un-registered account. There are benefits to using the right tool for the right job, and penalties for not.
Use a knife for the peanut butter, a spoon for the jam
I think this advice was brought to the both of us from either the Flintstones or Sesame Street, but my dad would repeat the jingle if we were going to make a peanut butter and jam sandwich. It’s a simple life lesson: be cleanly and organized.
If you are in the fortunate position to have “extra” cash to play with, or if you “have a hunch” that a stock is going to move, hey, more power to you. Take the plunge, if you see fit. But don’t get your ultra-risky speculations mixed up with your legitimate investments that should be the foundation of your savings.
Simply put, don’t take the money you are planning to use for a down-payment on a house and put it all in the latest IPO. If you can take a gamble, set up a separate account and keep only a small portion of your wealth there.
Do it right the first time
Nothing upset my father more than when he asked me to do something and I did it half-heartedly. Inevitably, he would make me re-do it. It taught me to put the effort into getting it right the first time.
This doesn’t always work with investing; we all make a bad decision from time to time. But if you can make the effort to make sound decisions, you won’t have to try to make up lost ground in the future.
Keep your head up
This was a hockey lesson. I remember forgetting this advice once, and skating full speed into another kid behind the net. My tailbone hurt for a week.
If you are a do-it-yourself investor, then you will have to keep on top of things, especially if you are investing in individual stocks. Buy and hold is a legitimate strategy, and one that I tend to follow. But if you are not reading up on your companies, then you may be left holding some useless Enron stock.
Another day another dollar
More than advice, this is something he would say (still says to this day, in fact) when he got home from work and I would ask how his day went.
I’ve said in another post that I view my human capital as my most important asset, and it really stems from this saying. As long as you can keep working, you can keep earning, which means you can keep saving. It also means that you can spend when you need to, knowing that you have this powerful asset in your portfolio.
Do as I say, not as I do
Probably the most frustrating to have to hear, but one of my favourites now, I would get this line thrown at me when I caught him in some sort of seemingly questionable situation where he told me one thing, but wasn’t following his own advice.
This is as important in investing as it is in life. There is a lot of good advice and wisdom out there from several people who know a lot more than you or me. It doesn’t mean that we need to do exactly what they are doing, especially when scale is an issue.
Falling from the top of a ladder hurts the most
Okay, I don’t know if he ever said these words exactly, but he used to always tell me to check the footing of a ladder before climbing, and then again on the first rung or so.
A solid base to a portfolio should be able to avoid (or lessen) the impact of a hard fall from market heights. This helped me when the market was approaching 15,000. The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.
I’m sure there are several more of these little gems that can be found. Feel free to add some in the comment section.