Teach yourself how to invest

9 steps to become a self-taught investor

Unless you were educated overseas, you probably didn’t receive any formal education on investing while back in school. This is more than a little surprising considering investing is the proven way to become wealthy.

While you can get comfortable with investing basics within a year or so, learning about investing is an ongoing endeavor. Even after many years, you can still expect to regularly develop and refine your knowledge.

Here are nine steps to learn about investing.

1. Read investing books

The best first step to learn nearly anything is to read relevant books (which might include listening to audiobooks). Each book and author will give you insights and different views into different investments and different strategies so that you can best put your money to work.

As there are thousands of books on personal finance, investing, and the stock (share) market, you’ll have to be selective. Just like any topic:

• Start with the ones with the best reviews
• Keep in mind you don’t need to read every single book in the world
• Determine if what you’re reading is relevant when investing from NZ
• Remember that much of what you learn might contradict other material. That doesn’t mean much of it is ‘wrong’, just that different strategies can work at different times and in different situations

2. Learn the investing terminology

One of the most confusing aspects of learning how to invest can be all the terminology. Investing and financial matters rival areas like law and medicine for the confusing array of terminology and jargon!

Bull market? Alpha? PIE fund? Bear market? Quant? ESG? Sharpe ratio? Index fund? ETF? Dollar-cost averaging? Active fund? R-Squared? What the heck do these all mean?

Before you have an anxiety attack and quit in frustration, take a step back. There are lots of investing terms, but most overarching concepts are straightforward to understand.

Write down words and definitions from your books and come back to them again. Re-read the terms you might not understand and do further research online if you need to.

The more you read and hear these, the more natural it becomes to understand and remember what they mean. You’ll probably be surprised how much investing vocabulary you’ll retain just from reading.

3. Take online investing courses

Online investing courses can be the best way to start or continue your investor education.

Luckily, there are plenty of affordable courses that create an educational plan for you and can take your financial health to the next level. (As a general rule, most free courses should be avoided, as they’re usually trying to sell you something).

There are a lot of benefits to taking an online course, which includes learning at your own pace, no need to organize and figure out what you need to learn, learning while wearing track pants from the comfort of your own home, the additional resources such as spreadsheets provided, and access to detailed information or instruction from well-regarded experts in the field.

So, what investing courses should you consider? Try searching the following platforms:

• Udemy is one of the world’s largest online learning platforms with a 180,000+ courses available split among 13 categories (one category is finance and accounting). Courses mostly cost less than NZ$100, or ongoing subscriptions are available
• LinkedIn Learning also has a range of courses
• Other online platforms include Coursera, Masterclass, and Skillshare
• Morningstar Investing Classroom is a specific course, and is one of the only free investing courses we’d recommend

Just make sure that whatever you learn is relevant to NZ, that any investments mentioned are available here, and that the subject matter covered is workable within the NZ tax system.

4. Access any resources provided by your employer

Most large organisations offer financial perks of some kind, and at a minimum, employers will generally make employer contributions to your personal KiwiSaver Scheme investment. Some employers offer non-investment financial benefits too, such as life insurance. Have a chat with Human Resources (HR) about what is on offer in your workplace and ensure you make the most of whatever is available.

Some companies even offer seminars or short courses about financial matters, this might include retirement plans and other benefits. Sometimes this is led by an HR representative or the department responsible for the employee benefits, and other times they’ll have an external representative come in to explain things and answer questions. In whichever case, attend the sessions and learn all you can!

Even if there are no sessions like this, connect with your HR representative and see if they can send you more information.

5. Start reading disclosure statements

According to the regulator of NZ’s financial markets, the Financial Markets Authority:

“A Product Disclosure Statement (PDS) provides you with essential information to help you decide whether to invest in a financial product. It uses clear language to explain the product and replaces older forms of financial product disclosure information such as investment statements and prospectuses…

A PDS describes how a product works and provides you with information about the organisation that is offering it. Importantly, it will give you an understanding of the risks and returns and any fees and charges. You must be given the PDS before you invest in the financial product.”

PDS’s must be provided for KiwiSaver Schemes, other managed funds, and so on.

Start reading these on funds you want to invest in, or already do.

This might not be super-exciting, but you will start to learn more and more, training your brain to become a seasoned investor.

6. Follow & read personal finance websites

As you begin your educational journal with investing, you’ll inevitably land on numerous financial websites and blogs. There are so many to choose from.

While there are many great sources of information (like this one!) there are also plenty of major media publications about investing that are worth bookmarking or subscribing to.

Investor beware!

Even with money experts and writers, you should still never blindly follow any specific tips they give. Remember, always do further investigating and ensure that any tips or general remarks are right for you.

7. Learn from stock or portfolio simulators

Another great way to learn about investing is with stock (share) simulators. If you plan on investing in individual stocks or may want to be active in day trading, then you can learn quite a bit from stock simulators.

These simulators are investing tools that simulate the stock market movements, but without you risking any real money. Think of it like you are using play money or “paper trading” and you can test out your knowledge and investing strategies.

You’ll find you can develop your skills, get a better understanding of how investment prices (such as shares) move without putting any of your hard-earned money at risk, yet.

Learn more:

• ‍Your guide to start investing in the stock market‍
• What are fractional shares?‍
• When to sell a share

8. Start investing a little

The best way to learn is often doing.

You’ll likely want to avoid risking all your funds early on, especially if you can’t afford to lose it. While funds and stocks can sometimes be expensive, we live in a time when you get to start investing with not much.

9. Follow investing forums and join social media investing groups

But, investor beware!

If you were learning to be a pilot, would you rather learn from:

1. A professional pilot and flight instructor who has been flying jets most workdays and some nights for the last 25 years? Or
2. A qualified but amateur pilot who occasionally flies a single-engine propellor-driven aircraft as a hobby on the weekend, when the weather is good, but who otherwise works a non-aeronautical day-job? Or
3. A flight enthusiast with no aeronautical qualifications or experience?

Assuming you’ve all selected number one, then the same rule of thumb should apply when it comes to learning how to invest (or learning anything for that matter!).

Online investing forums, chat rooms, or social media clubs or groups related to investing are places of open discussions, asking questions, and insights from people of all sorts of backgrounds. When you get involved or engaged in any forums around finances, always do plenty of your own research. Everyone has different experiences and views on money, so your needs and situation will be different from strangers on the internet – who, to circle back to the pilot example, probably mostly fit into the second and third categories listed above! Some people may sound great and make excellent points, but we’d still suggest about 80 percent of all material in these groups is garbage.

Despite this, so long as you keep your wits about you, a lot might still be learned when engaging in such a way. You might find many answers to questions you have, links to other resources, and the discussions with others might help you to think like an investor.

Before listening to anyone, ensure you know who they are, their background, any conflicts they have, and what makes them worthy of listening to in that area. Just like everything else online, a little caution can go a long way.

The bottom line: how to become a self-taught investor

Becoming an investing expert will not happen overnight, so avoid get-rich-quick schemes and instead focusing on getting rich for sure. Before you invest any sizeable sums of money, you want to follow the steps above, and support that by ensuring you’re first on a good financial footing. That includes working at your overall money management and current financial situation, as there’s little point investing if you’re in bad debt, for instance. A couple of questions to ask yourself before investing might include:

• Do you have a readily accessible sum for contingencies?
• Do you have a cash surplus after paying all the bills each month or fortnight?
• Do you have any high interest debts that should be repaid before investing?

Even if you feel comfortable with investing, questions like those above can help you figure out if you’re ready to be an investor.

Better yet, if you'd like to discuss your investments and overall financial situation with a trained professional, then get in touch.