In a few weeks (hopefully sooner), I’ll be debuting a series on investing by a new blogger who’s generously offered to teach me and the other investing ignoramuses all about the foundations of investing. I’m really looking forward to this because it’s definitely a facet of personal finance that I just don’t get but need to. Because, you know, it’s kind of important if I want to have money later on. That’s not just from savings. So I’m totally stoked for this series.
In the meantime, I wanted to share that, although I still sit firmly on the “I don’t understand investing” side of things, I have picked up a few tips since I made that confession. Before you investing smarty pants get all excited that I learned this information from legitimate sources, let me assure that I did not. No. I learned about investing through…Words with Friends.
Seriously. I did. I’m not joking.
Perhaps Words with Friends is not the most traditional place to pick up information about investing. But it works for me. And I should state that I still can’t tell you what an index funds is or why mutual funds are a good idea or if those two are even the same thing. No, what I can tell you that what I’ve learned is more generalities. And that’s pretty much all I need to get by (well, probably not but it works for me).
So what have I learned that has made me so smart? Well, let me share:
Hope you get the right letters
In Words with Friends, you don’t really have much control over the letters you get. But you hope that, after you play a word, the random letter genies give you good letters so that you can make actual words (and play them on the double and triple words boxes) for big points. You want to keep amassing those big points, with the help of some strategically played “Z”s and “J”s so that you can obliterate your opponent while being able to show off about the huge score you pulled. Or, you can resign because you keep getting letters that create no words or puny words like “or” and “if”.
Picking stocks works the same way.
Since each publicly traded stock is assigned 3 letters (I think), and you pick those letters based on what I assume is careful research (or, if you’re like me, which companies you like. Or by just looking at a page and picking whatever your finger lands on), you put your money on the fact that those letters are going to pay you big dividends. Those big dividends then line your pocket and you get to brag to your friends or anonymous strangers about your ability to cash in on those three letters. You can also be extremely disappointed at their return, and realize that you banked on the wrong letters, and you hope you can keep quiet about your poor letter picking ability.
When I get good letters while playing Words with Friends, I try to hang onto them as long as possible so that I can play them in a good spot. I’ve even been known to skip a turn, hoping that my opponent plays his or her word in the spot I’m psychically willing them to so that I can then play my letters where I want. Like most players, I will try to build words off of double and triple letter/word boxes, hoping that this strategy will allow me to win. I have other strategic moves but I don’t want to give them away just in case we ever play each other and then you’ll know what I’m doing and how to build a good offense or defense and then beat me. But know this. Before you play a word, I already know what my next move will be. And I have a back up move in case you ruin my plan. I must have a strategy because that? Is key if you want to win at Words with Friends.
Just like it is with investing.
Those who play the stock market also have a strategy. From what I’ve gathered, they pay attention to the price of stocks so that they know when to buy or sell or whatever else is possible to do with one’s shares. They have a strategy for which stocks to own, which ones to avoid, and which ones to gamble on. Keen investors have a strategy when picking where to place their money. They know when a potential purchase of a business or real estate property or whatever else they’re going to spend their money on is a smart move or one that could end up in either huge disaster or gigantic payoff. But before they do it, they develop a plan for how they’re going to make the most money from their investment. It’s the smartest move they can make.
Keep track of what you have
During a game of Words with Friends, I obsessively check my letters. I want to know what I have, what words I can make and when I need to swap or pass on my turn. By keeping track, I’m able to develop that all important strategy so that I can, hopefully, avoid losing. I need to know what’s going to get subtracted at the end so, in the event of a loss, I know how bad it’ll be. I don’t like to lose and I certainly don’t want it to happen because I did a poor job of tracking what letters I can use where.
In investing, it’s important that you know where you’ve invested your money. You need to remember if it’s in stocks or bonds or properties or a friend’s doggie shoe business. You need to track how much you’ve put in to each investment, how much of a return you’re getting, and whether you need to make adjustments so that your money is working for you at its maximum potential. And, most importantly, you need to make sure that you have enough set aside to pay your taxes on those dividends and interest. Because if you don’t track that properly, you could end up sharing a cell with Wesley Snipes.
Sometimes, when I’m playing a game, I really, really want a letter so I can make a stellar, high point word. And that letter takes forever to show up. Or it never shows up at all and I have to readjust my game plan. But mainly, I just need to sit back, be patient and wait to see what happens. This patience is key to a successful game plan (and so is a little luck, but luck is a tricky subject and this post is long enough already). Or not. It depends on the game.
Such it is with investing. Often, we don’t see the results we want right away and it causes massive anxiety (well, I’m assuming it does). We see the ups and get excited; we see the downs and want to bail. But what we really need to do is be patient, wait it out, and then make an informed, careful decision. From what I gather, if you’re patient and ride out the storm, your investments will pay off big time. Unless they don’t. In which case, you can pride yourself on not making a rash decision but being angry that you lost money. Because that’s totally fine.
So that’s it folks. Thanks to Words with Friends, I’m just a little bit smarter about investing. Which is probably good for my bank account and my eventual retirement.