Should The Middle-Class Invest? Or Is Investing Only For The Rich?

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On “Only The Rich Can Invest Since It’s So Expensive”

The first myth uttered by most people I know is that: “Investing is only for the rich.”

“Ah! You can only invest because you have a $5k salary, and you have no debt, and you’re single, and you don’t have a house to pay for, or a girlfriend/boyfriend to spend it with, or parents to pay a stipend to. And you don’t have bills. No insurance premiums. No ongoing hobby. No children to care for. Of course easy to invest la.”

Unnamed relative.

Well.

No.

Not at all.  

That’s not true in the slightest.  

I don’t have a $5,000 salary.

I don’t have student debt because I worked 4 nights a week, 13-16 hours shifts at Cisco to get 1.8k plus a month as a part-timer in addition to what my parents could provide.

I’m not single.

I don’t have a house to pay for, that’s true. But I do have a girlfriend to spend time (and therefore money) with, and I do have parents to give a stipend to.

I have bills.

I have insurance I need to pay for. And I have a cyclically expensive hobby in Magic: The Gathering (although since much of the value retains itself well, I tend to not care so much).

I don’t have children. I also don’t have a house. Yes, both are true.

But I’m also 28 going on 29.

But is that really the point?

No! It isn’t!   

The point isn’t about who you are or what you earn or what you have to pay for or what you need to do.

The point is that if you don’t manage your expenses, almost everything you need to do in life is going to be expensive.

If you don’t save, if you spend every cent you make, how are you going to buy a house?

Buy a car?

Marry someone?

Have a kid with someone?

No wonder “investing is expensive.”

Well, if you don’t manage your money well, everything is expensive, isn’t it?

Travel can be a problem. Food can be a problem. Paying for bills can be a problem. Paying for tuition and university can be a problem. Paying for utilities can be a problem.

So really, it’s not about “only the rich can invest.” It is that the rich know how to manage their money.

It’s really that your money management skills aren’t up to par. Or maybe you just have multiple inefficiencies in your spending.

Maybe you’re overpaying on food. Maybe you take cabs too much. Maybe you buy too much luxury goods you don’t need. Maybe you’re overpaying on your endowment plans or your Investment-linked products.

And its on you to fix it.

Stop eating eggs at the coffee shop for $0.60. Eat it at home for $0.16 ($5 gets you 30 eggs).

Stop Grabbing food. Stop taking Grab taxi so much. Stop overpaying for your endowment plans or channelling so much of what you need in cash into your Investment-linked products.

Go fix it.

It’s on you.

It’s not about being rich. It’s about managing your spendings and managing your monthly cash flow. It’s about keeping an eye on yourself.

Are you staying disciplined?

Are you doing what needs to be done?

Are you keeping an eye on your spending?

Are you finding ways to make it easier for yourself to adapt to your new habits? Because if you don’t, I’ll be the first to tell you it will be so damned difficult to control your old habits!

I couldn’t be bothered to control my spendings on day to day. In fact, I tried and failed for months. Eventually, I took out my bank card, took out my credit card, threw it into my drawer and started drawing $140 every week,

My method of control was to only have $20 in my wallet in cash every day. If I didn’t have it, I couldn’t spend it.

No withdrawal. No card.

No spending beyond what was in my wallet. When I transitioned to my new workplace, I brought $10. Because the other $10 I kept in my timbre+ account. And everything I save from it, I get to spend next time over an above what I’ve put away.

When I saw that a breakfast of 4 eggs and coffee was costing me $4.50 in the mornings, I did the numbers and decided to simply buy 30 eggs and cook them at home. I could have coffee from the espresso machine in the office.

Total cost reduction? Breakfast now cost me $0.16 per egg. At 4 eggs, that’s $0.64. Coffee is now free.

I save $926 a year (more or less, sometimes I miss days and end up buying anyway, but not often) which basically allows me to take a smaller position in yet another stock.

Simple.

So you make it easier on yourself to manage your cash flow.

Or you will forever think investing is expensive and only for the rich.

On “The Rich Have Access to Resources The Middle Class Don’t, And the Middle Class Get Killed in the Market”

The first thing to ask yourself when you’re confronted with a maxim like this is to see if you can prove it false.

Do rich people really make money off of the middle-class?

My experience? No.

Not at all.

There’s no rich guy on the other end of the line yanking cash from your account through some elaborate scheme when you lose money.

That’s utter rubbish.

So what happens when the middle-class guys make a killing on a stock? Does he yank the cash from the rich person’s account then?

Is the middle-class guy suddenly “rich”?

If you’re going to assert that it’s true that the rich have better resources, then yes. It is true. Well, by virtue of being rich. They have more money. More money, more returns.

But more resources does not mean better returns.

It is all hinged however, on the fact that they need to be good at investing.

Whether you’re rich, poor, middle class, fat, slim, fit, good looking or ugly, university educated, privately educated, or from an ivy league college, the stock markets don’t care.

You make money or lose money on the back of your decisions and your decisions alone.

And neither being rich or being the so-called smart money/best is going to stop you from losing your pants in the stock market. If that was true, this hedge fund guy wouldn’t be posting a public apology, and most hedge funds that the rich invest in wouldn’t be underperforming the S&P Index.

Always seek to disprove theory and hearsay. Only then can you find the truth.

On “Should The Middle Class Invest”

Well, the answer is that it really depends, doesn’t it?  

The truth is that everyone in the world today have multiple, specific problems to solve.

Like, how are you going to handle inflation at 2.57% a year when your cash in the bank grows at 0.05% a year?

How are you going to handle Artificial Intelligence disrupting jobs?

How are you going to find, earn, or make enough money to live the life you want while you still can? Before you grow too old or too infirm to move around and travel?

How are you going to enter the world and build yourself a mechanism and structure of safety, of assurance, of stability and reliability for yourself?

In today’s society, that’s the basic need. We don’t fight tigers in open fields as our ancestors did, but we sure need to fight a whole different monster another way in the concrete jungles.

If you go one step beyond that, how are you going to build that for your family now? For the family that you want to have? For the people who will eventually depend on you?

Do you have a skill that makes you invaluable and highly sought after? Does this invaluable skill give you a job that makes you an impossible amount of money such that it can address the problems of inflation? Of temporary job loss?

Does it pay you such an obscene amount of money that it invalidates any danger life throws at you?

And if you don’t have that then what do you have?

Do you own a business that can run and generate an income without you? So you don’t have to be present to make money?

Is the business independent of your involvement so that you can live the life you want, and more importantly so that you can be sick and still have money coming in? So that you can be old and still have money coming in?

So that you can one day walk away from it without it being just another job?

And if your answer to all of the above is unclear, opaque, and not detailed then put yourself together and try to figure out a way because life is going to kick you in the teeth again and again and again until you figure this part out!

And at the end of the day, if you don’t have such an invaluable skill or such a business or a high paying job, you better pick up that skill, build that business or learn to invest.

And so my answer to whether the middle class should invest is this.

If you don’t or can’t pick up that skill, and if you can’t or won’t build a business.

Then pick up investing. (And by the way, you can still do this while picking up a skill or building a business, investing is by far, the lowest cost in terms of time)

And of course, next comes the questions.

Like, will investing be scary? And will investing be difficult? And is investing success guaranteed? And can investing give me the reliability, assurance and safety that I desire?

And the answer hurts.

The answer is yes, investing is scary.

Investing is difficult.

Investing success is not guaranteed.

And investing may never be able to give you the reliability, assurance and safety that you desire.

Anyone who tells you bloody otherwise is full of rubbish.

People of all sorts slump over at this and I see the lights go out of their eyes and they just don’t want to do it. Some of them give up. Some of them slink away. Some of them just sort of shuffle off and never show up again.  

So Investing Is Scary and Difficult: So What?  

Investing is difficult.

So was swimming. So was doing 15 pull-ups. So was getting gold in 2.4km timed runs. So was marching 24km. So was paying school fees. So was earning my way through university. So is work.

Everything in life is difficult at first.

And I can’t promise you that it will free you instantly and make you mega rich and be super easy.

But I can promise you it will get easier over time.

Running got easier over time. Marching. Working. Earning. Saving.

The key, as with anything else in life, is to take constructive, baby steps.

Just like you did as a baby when you learned to walk for the very first time.

And look at you now! You can walk! Run! Jump! Climb or descend stairs flights at a time!

Well, investing is the same.

Success comes – as with all things in life – from the consistency of your efforts and your discipline, applied in a practical manner.

That’s all.

If you’re a doctor, an engineer, a civil servant, a mechanic, a cook, an electrician, a father, a husband, a wife, a mother, or in fact, any professional occupation, – they were all difficult at first.

But they too got easier over time.

So should the middle class invest? Well…

That’s on you.

A large part of whether the answer is yes or no will depend on your personal circumstances. Your tendencies.

I’ve made my choice as a middle class Singaporean.

Now you have to go make yours.

PS: I scoured the web and compiled a list of books (some I read and am still in the process of re-reading) which I and most of the investment community feel are must reads. I can promise if you read and learn from these books, you will gain at least a crystal clear understanding of what investing is all about.

  1. The Intelligent Investor by Benjamin Graham (recommended by Warren Buffett, chapters 8 and 20.)
  2. Common Stocks and Uncommon Profits by Phillip Fisher (recommended by Warren Buffett himself)
  3. One Up On Wall Street by Peter Lynch
  4. Big Debt Crisis by Ray Dalio
  5. What Works on Wall Street by James O’Shaughnessy
  6. Fooled by Randomness.
  7. Poor Charlie’s Almanack by Charlie Munger
  8. The Snowball: Warren Buffett and the Business of Life (Biography between Buffet and a reporter)

PS. This is only if you wish to learn to invest faster than you can from reading books…or if you’re not too book-inclined. Feel free to sign up for an introductory course on investing here.

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Irving Soh

Behavioural Psychology fanatic. I like good food, movies, intelligent conversations and logical reasoning. I also dabble with options, factor-based investing, and data analytics.
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