Recommended education path for a future individual investor?

Question

I'm an 18 year old who wants to become a individual investor. My plan is that one day I can become free of the modern day monetary burdens that most adults carry with them and I can enjoy a short life without these troubles on my mind. But the problem is I want to reduce the risk of me possibly failing in the markets due to lack of expertise.

You would probably advise me that I should read this book or that book on this philosophy or this technical course. I cannot manage to read books on how to invest and what not when I don't even know how the financial markets work in depth. But you might reply back to me with, this book teaches you everything about the markets! Read it! If it turns out to be only some kind of obscure mathematical textbook that you give me for investing , that would be incomplete in comparison to what a real person with a real education gets , which is mostly over 50-75 textbooks with the lectures , examinations , assignments and so on. Now if you give me a book which instead describes a philosophy of some kind on investing and it comes with a saying like "Buy low , sell high" or "be patient as you hold your stock" which is just completely obvious to some people with barely any knowledge of investing. I don't need a book that describes this basic idea in 10 pages. Oh and what's worse is , when I come back asking for more advice I get another book that has a conflicting philosophy from what I previously read and has different sayings which are described for 10 more pages than the length of the previous description for the basic idea(s). Also , I know that investors don't need any formal educational requisites to enter the financial markets. However , people still mention it? It barely has any relevance to what I'm trying to ask (which is mentioned in the title of this question). I'm sorry if I sound so rude but it's typical of what I've been through when I tried to ask this sort of question.

I'm thinking that the vocational description of what investment portfolio managers do is very similar to what real individual investors do. Investment portfolio managers (investors) are responsible for controlling and investing vast amounts of money for (themselves) large institutions, such as banks, trust companies, pension funds, and mutual funds. They are expected to increase the money they control by investing it in the right industries, companies, and funds, at the right time. Since there is so much money at stake, managers (investors) analyze businesses and industries very carefully before investing in them.

Is the education and training path for a investment portfolio manager something I should take? It says that you need at the minimum a 4-year undergraduate degree with either a major in accounting, business administration, finance, or economics. And that graduate work in finance or an M.B.A. is also preferred. Courses in communication, writing and computer science are also needed as well. But wait there’s more! You also need certifications which include the Chartered Financial Analyst from the Association for Investment Management and Research, and a Fellow in Risk Management from the Global Association of Risk Professionals.

Is this the right path I should take? Or am I completely wrong? Any other information would that you think would be useful would be appreciated. Thanks.

Answer 1

For a job doing that kind of stuff, what is PREFERRED is 4 year undergrad at ivy league school + 2 year MBA at ivy league school, and then several more years of experience, which you can sort of get by interning while in school

this will of course saddle you with debt, which is counterintuitive to your plans

basically, the easy way up is percentage based compensation. without knowing the right people, you will get a piss poor salary regardless of what you do, in the beginning.

so portfolio managers earn money by percentage based fees, and can manage millions and billions.

real estate agents can earn money by percentage based commissions if they close a property

and other business venture/owners can do the same thing.

the problem with "how to trade" books is that they are outdated by the time they are published. so you should just stick with literature that teaches a fundamental knowledge of the products you want to trade/make money from.

ultimately regardless of how you get/earn your initial capital, you will still need to be an individual investor to grow your own capital. this has nothing to do with being a portfolio manager, even highly paid individuals on wall street are in debt to lavish expenditures and have zero capital for their own investments.

hope this helps, you really need to be thinking in a certain way to just quickly deduce good ideas from bad ideas

Answer 2

It depends on whether you want a career as a fund manager/ analyst or if you want to be an investor/ trader.

A fund manager will have many constraints that a private investor doesn’t have, as they are managing other people’s money. If they do invest their own money as well they usually would invest it differently from how they invest the fund's money. Many would just get someone else to invest their money for them, just as a surgeon would get another surgeon to operate on a family member.

My suggestion to you is to find a job you like doing and build up your savings. Whilst you are building up your savings read some books. You said you don’t know much about the financial markets, then learn about them. Get yourself a working knowledge about both fundamental and technical analysis. Work out which method of analysis (if not both) suits you best and you would like to know more about. As you read you will get a better idea if you prefer to be a long term investor or a short term trader or somewhere in-between or a combination of various methods. Now you will start to get an idea of what type of books and areas of analysis you would like to concentrate on.

Once you have a better idea of what you would like to do and have gained some knowledge, then you can develop your investment/trading plan and start paper trading. Once you are happy with you plan and your paper trading you can start trading with a small account balance (not more than $10,000 and preferably under $5,000). No matter how well you did with paper trading you will always do worse with real money at first due to your emotions being in it now. So always start off small.

If you want to become good at something it takes time and a lot of hard work. You can’t go from knowing nothing to making a million dollars per year without putting in the hard yards first.

Answer 3

My plan is that one day I can become free of the modern day monetary burdens that most adults carry with them and I can enjoy a short life without these troubles on my mind.

If your objective is to achieve financial independence, and to be able to retire early from the workforce, that's a path that has been explored before. So there's plenty of sources that you might want to check.

The good news is that you don't need to be an expert on security analysis or go through dozens of text books to invest wisely and enjoy the market returns.

The optimal strategy is to buy and hold a broadly diversified, very low TER* index fund.

This is the Bogleheads philosophy. It's widely accepted by people in academia, and thoroughly tested.

Look into it further if you want to see the rationale behind, but, to sum it up: It doesn't matter how expert you are. The idea of beating the market, that an index fund tracks, is about 'outsmarting' the rest of investors. That would be difficult, even if it was a matter of skill, but when it comes to predicting random events we're all equally clueless.

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*Total Expense Ratio: It gives an idea of how expensive is a given fund in terms of fees. Actively managed funds have higher TER than indexed ones. This doesn't mean there aren't index funds with, unexplainable, high TER out there.