By Maya Peterson, author of Early Bird: The Power of Investing Young
Make sure to check out Maya’s (impressive) bio at the bottom of the article
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
My story is not just a list of credentials (Although I have those too: I was the first woman to present to Google’s investment club at age 14 and was accepted to the Motley Fool’s College Woman in Investing conference when I was in fifth grade, among other things). My story is made up of the values I learned from my lifestyle and hobbies that make up a value investor, and I found my investment path.
So, let’s talk about ice cream:
Everyone eats their ice cream cones differently. To start out, some use a cone and others a cup; some pile on toppings like hot fudge (my favorite), peanuts, sprinkles, or cherries, but others enjoy the plain, milky flavor; some ice cream enthusiasts see how fast they can eat their banana split whereas others savor it for hours to the point where it’s annoying.
I’ve been told a range of things about my consumption of ice cream, for example: “Why do you have to eat so slowly?”, ” It feels like eternity”, “You should just hurry up, why can’t you just finish it by now for gosh sakes?” Whichever way you put it, eating ice cream as slowly as I do takes a lot of patience.
Value investor trait number one? Patience. Check! Patience is a characteristic I developed long before I started investing or even interacting with simple math.
The marshmallow test is a famous experiment to test a child’s patience. They are handed a single marshmallow. If they choose to eat their given marshmallow right away, they are gifted no more. If they wait an extra five minutes, they can earn another marshmallow. The longer they wait, the bigger the reward they receive. I’m not a marshmallow maniac, but I’ve always been one to wait for that extra benefit.
I’m also am a dancer which means I realize that hard work needs time and focus. When I finally earned my first pair of pointe shoes, I could barely stand. Four years later, I can spin, fouette, hop, and jump. That’s four years of ongoing training to be able to stand on your toes! Looking beautiful is fun especially with pointe shoes, but while you’re softly landing and gracefully spinning, you’re enduring unbelievable amounts of pain, remembering a combination in French, and staying on beat. It never feels like you’re making all that much progress day by day, but it all pays off in the long run! Surprise, surprise, so does value investing.
Value investor trait number two? Discipline. Check!
The best part is, you don’t have to like marshmallows or love ballet to be an investor. If you are reading this and you are young, you have a crucial ingredient to having an amazing future. Time endows the magic of compounding. Many young people can easily learn some basic habits of a value investor, and they can all learn about how to sniff out a solid P/E ratio. Like waiting for a marshmallow, young people just need to realize that making money isn’t always about instant gratification. The longer you wait, the bigger the reward.
To invest, you have to choose to save. I understand that thirst for a Snapple from the vending machine after gym class, but buying a Snapple every day this year, adds up quickly (one dollar per Snapple, purchased every day for a year means they pay $365). And what happens when $365 starts earning interest and then that interest compounds?! Amazing things happen. That is what my book, Early Bird: The Power of Investing Young, is here to help young people understand. Investing in your future by making good choices in the present will yield positive results. Teenagers have great power and what teenager doesn’t want to hear that?
That’s my story, and that’s how easy it is to begin. Be an Early Bird and start now.