I love a good analogy, so when I read Fretful Finance’s savings fountain post, my analogous juices started flowing for one of my own.
One of the biggest obstacles in investing is the getting started. You can read all the investing for dummies books and watch all the Plain Bagel videos you can cram into your day, but if you don’t at least begin to dip your toe into the waters of the financial markets, you won’t ever give yourself a chance of making a penny.
So where does risotto come into this?
Much like the aforementioned investing ‘stage fright’ – that investing is only for those with experience and knowledge a mere ‘normallo’ like me couldn’t possibly possess – the biggest obstacles that comes with cooking a decent risotto often comes from an individual’s apathy that a risotto takes too much time, can go wrong incredibly easily if you take your eye off of the cookery pot and should be best left to chefs that know what they’re doing.
So let us go through the stages a beginner, retail investor typically goes during their investment journey…through the medium of risotto making…
Choosing your ingredients
Investing– Read some introductory books on investing or at least glance over some of the popular blogs online and take in the diverse array of investment options open to you. Will it be passive or active or a mixture of both? Will you choose individual stocks or a collection of funds and trackers? All options can make you money, it’s just a case of doing your research in order to create a plan that allows you to achieve your investment goal. All goals lead ultimately to the same outcome with investing: make more money than when you started.
Risotto– Jump onto Google, type in ‘risotto’ and click on the first link you see for recipe ideas. Will it be bacon and mushroom or spinach and parmesan? There are a multitude of possibilities for a variety of different tastes, ultimately with the same goal in mind – making a tasty rice dish.
The sizzling start
Investing– You’ve done it! You’ve thrown your first amount into the market in some form or another. But within a month of your first deposit the market falls 10%, a market correction has occurred and you’re now experiencing your first obstacle investing, whether to pull the plug or be brave and hold your nerve.
Risotto – You’ve prepared your ingredients and you’re off! Throwing in the onions and mushrooms into a hot oiled pan turns your kitchen into a chaotic and noisy affair. Bits of onion that haven’t quite come in contact with the oil are sticking to the pan, and the mushrooms are cooking too quickly. This is your moment to stick or twist; can you salvage your dish or will it quickly turn sour before you’ve even really begun?
A rice approach
Investing– You’ve come through the initial storm and accepted the market’s erratic behaviour. As a result, you feel comfortable enough to add a second amount to your new portfolio and maybe even a second fund or stock holding; your portfolio is starting to materialise.
Risotto – You have the onions and mushrooms under control but you’ve realised that they’ll continue to cook and could burn if not watched every now and again. You continue on to the next stage by adding the rice where your risotto begins to take shape.
Drip-feeding your ‘stock’
Investing– You’re beginning to understand the ebb and flow of the market, and started to accept this as normal and inevitable. You have, however, begun to realise your best option for long term, amateur investing, is to drip feed an amount at regular intervals throughout the year in order to take advantage of pound cost averaging. Automating your investment journey creates the least stress and stabilises your mind in order to reach your end goal.
Risotto– Your risotto is starting to take shape after the noise and chaos of frying off your ingredients and rice. Adding your stock is bringing a sense of calm and starting to bring the dish together. Being patient and continuing to gradually add your stock at regular intervals will eventually prove your hard work worthwhile if you stick to the plan.
So investing is a lot like making a risotto. You need to first break down these pre-conceived ideas that it’s too time consuming and takes up too much of your time to be worthwhile. Realise that it’s a (mostly) simple process, made all the less burdensome by being patient and adding to your portfolio in small but regular intervals.
If investing really isn’t for you, you could always resort to the short-term gratification, kebab shop burger (leaving your money in cash). But I guarantee you the journey is a lot less exciting and the end result a whole lot less lucrative….