What I have learnt about investing before 25.
Hold, hold, hold and when possible, stretch yourself.
After a generous tow truck driver took myself and my mum home the other day (Check out the Cars and Kefi tab for the full story) we went through the inevitable conversation you do when your car breaks down - What cars are you into? What do you have in the shed? Which one was the ‘one that got away’? To get to the point, it got me thinking about what people tend to realise in their 40s that they seemed to be completely oblivious to in their teens and 20s’. Everyone in their 40s seems to have a story about something they let go of, for not much money, at some point in time, for no real benefit and without any plan on what to do after they sold whatever it was in question. Further to this, everyone seems to have missed the class in high school economics about the whole supply and demand ‘voodoomagicthingbobulouskaramajama’ (Yes, I just invented that word because it was fun).
I am not well off, I haven’t necessarily made ‘smart’ moves, nor have I actually cashed out of any of my ‘investments’ but I did want to discuss how I managed to do a few things that now, at 28 and with a mortgage, I probably wouldn’t have the flexibility to do today, that I am glad I did. So, in saying that, here are some things I have learnt along the way.
1) Supply, demand, technology: I always thought that whatever was old, held some inherent value. If the new stuff was out, there would always be something newer around the corner to replace it, devaluing whatever was new and shiny just days or weeks ago. When it came to cars specifically, I also noticed that many people crashed them and, in hindsight, many people didn’t look after what they had. This meant, from whatever pool of cars was made, even less of those were good and, every year, less and less were probably going to exist or be running - the kicker? They were never going to be replaced by anything similar and technology and regulations made sure of that. So, supply, or lack of supply and creation means demand goes up.
2) Hold: I saw people buy and sell, but it was a lot of pain, energy, time and the profits were hardly worth the negatives. Rather than buying and selling 10 houses to make a 30k profit that you have to pay a tax on each time, holding and renting may have actually been more favourable until you could slowly buy another property that you could hold and rent. Same went for cars, just because you can flip a car for $2000 more than what you paid for it doesn’t mean you should.
3) Global demand matters: Whenever I wanted to buy something, I always compared it’s demand in another country to it’s demand in Australia. For example, cars (Yes, I like cars), can be desireable in many countries, but their cycles of increasing or decreasing in value differ AND, just because a car holds value in Australia, like Holden, doesn’t mean it carries the same weight in the United States rebadged as a Pontiac. So, if you in invest in a Holden, who is the likely candidate to see value in your car in the future and why?
Brands also carry a lot of weight and, some of them, even globally - this means, if you ever wanted to get out of something, you may have a range of buyers for your item not only in your home country, but globally. For some, this can be important.
4) You can afford to be broke: If you have a good support base, an affordable lifestyle and are money conscious, your bank account can be quite elastic. What I mean by that is, you can save up a lot, but you can spend a lot in repeated cycles. I learnt quickly that it wasn’t worth it for me, at the time, to keep my money in a bank account as interest rates weren’t high - I thought it was better to save with the intention to spend it and put it into things that I could enjoy and that would hold their value. It was a conscious decisions, sometimes, to pretty much hit less than $500 in my account. This meant that I had to hold a long term perspective on my purchases as, sometimes, this meant buying what I wanted i.e. a rare part, that I couldn’t actually use as I couldn’t cover the operating costs like putting new tires on a set of wheels so I could put them on my car - and then covering the wheel alignment and wheel balancing when it came time to fitting, so they sat in a garage for a while until I could afford to do so.
5) Above all (What I have learnt and live by) is buy what you like and care about - no matter what people say (As long as you can afford to purchase it, and afford to lose the value of it entirely): The world is full of niches and, those niches have gotten deeper and wider as time has gone by. If I listened to my friends in high school when it came to how I should spend my money, then I would not have had the fun I have, learnt the life lessons I have OR be able to afford what I have if I were to try buy it today.
Whenever it came to making a purchase, I had to love an item, even if it didn’t function. In some sense, what I bought I looked at like art. If my car was broken down in my garage, would I still be willing to keep it just because I love the way it looks (Or can make it look)? If the value of my Pokemon cards went to one one hundredth of what I paid for them, would I still want to wake up some mornings just to look through them and enjoy the designs, descriptions and the memories I had with each card when I played with them at recess and lunch with my friends?
One commonality - the answer was always a resound ‘HELL YES’ for that reason, I think what I had proved it would have value beyond it’s function or use AND that was a good thing. Also, I could be happy, even if things went wrong - that is always a good move in my books. If you like something a lot, don’t compromise, see if you can make it work. Not at the cost of your health or anything, but try make it work - if you can hold onto it until you graduate university or until you finish your apprenticeship, you may just thank yourself for making some sacrifices.
