How becoming an investor is like learning a musical instrument
As we get older, most of us stop learning new things.
I don’t mean those lessons we need to keep relearning – that it’s less hassle to buy a Valentine’s Day card than to argue it’s all commercialised nonsense – but rather the big skills.
You know, like a new language or how to fly a plane or, in my case, learning a musical instrument.
Once more with feeling
Ever since I was a kid I’ve wanted to play the piano.
Like all kids, I was used to having no idea about anything and being routinely terrible at everything. That would have surely made it easier, but I never learned how to play back then.
Being out of your depth is the daily grind of childhood. But few of us live this way as adults. Rather, we get comfortable and stick to what we do well – whether that’s eating with a knife and fork or performing brain surgery. We stay in our lane and feel competent most of the time.
You’re instantly reminded why if you do try to learn something new. It’s straight back on the fast track to that state of childish awkward, hopeless, haplessness.
My piano playing today reminds me not of Chopin or Debussy but of walking past a classroom and hearing someone trying to pick out Mary Had A Little Lamb or Jingle Bells on an out-of-tune school piano.
Worse still, I can’t even play Jingle Bells yet – at least not with both hands together. Rachmaninoff will have to wait for a decade or two.
Learning to be an investor
There is, however, one endeavour I got to grips with as an adult, and that’s the art and craft of investing.
I’ve been studying and practising investing for nearly two decades. But I still remember that early feeling of having absolutely no idea what was going on.
My struggles with the piano have brought those old feelings back. They may be familiar if you’re still finding your way with investing.
1. It’s all gibberish
Harmonic 4ths, time signatures, treble clefs – music is a jumble of words that don’t mean anything at first. Sometimes that’s because they’re not even in English! Fortissimo sounds like something a love-struck Italian would exclaim at a beauty pageant. Demi semi quavering is what I do as I turn over the next page of my musical theory textbook.
It’s the same with investing. Old hands like me throw around P/Es, DCFs, NAVs, and VIXes, but to most people, they sound like the names of Star Wars droids.
2. You can’t do what you want to do
Perhaps you hope to be the next Warren Buffett. Maybe you just want to be sure you’ll have some money in your old age. You know what you want, but to get there you need to get used to this whole new world.
Experienced investors might think it’s easy to just buy an index tracker. They’ve forgotten brand new would-be investors can’t tell an index tracker from a Ponzi scheme.
3. You keep discovering there’s even more to learn
After a few weeks, I could finally read the notes on the treble clef and bass clef – part of the mysterious hieroglyphics of musical notation. For five minutes I felt like I’d achieved something. Clair De Lune here I come! But then I was told about key signatures, which mess with the notes I’d learned in myriad different ways.
The same thing will happen to you many times on your investing journey.
To give one example, after a couple of years I finally knew what all those acronyms meant and fancied myself as a bit of a stock picker.
But a little knowledge is a dangerous thing. I held lots of banks for their high dividend yields ahead of the credit crisis, and when yields started rising I thought they were getting cheaper, so I bought more.
It was only the postings of some veterans on our old discussion boards that made me truly realise (just in time!) that a high yield can be a warning sign as much as an opportunity.
4. Other people seem to find it very easy
If you watch financial TV or even just have a certain type of friend, you’ll hear investing is easy. Cheap, great companies are lying around like winning scratch cards with the numbers revealed, for example. Or perhaps that a crash is obviously just around the corner, so everyone knows you should sell everything right now.
At first, this is very impressive. After a while, you’ll notice that despite the ease with which they claim to pick winners, it’s never their round in the pub – and you’re still waiting for the huge market crash they said was a certainty years ago.
It’s easy to bluff in investing but very difficult to win, at least if you’re trying to beat the market. Most people fail, but don’t expect them to tell you about it. That goes for fund managers, too.
At least with the piano, it’s obvious whether someone can play or not. But you’ll still get frustrated when you see them knocking out notes in perfect harmony.
5. You wonder what the point is
I suppose it’s no wonder most people give up learning a musical instrument, be it the piano or the flugelhorn.
Learning is no fun, especially at the start when it’s bewildering. And even as you get better, it only makes it easier to hear your own inadequacies.
Experienced investors are also more aware of their limitations. Indeed, my top tip when someone is holding forth about investing is to listen to how often they recall their bad calls or losing trades.
If everything is a winner, smile politely and move on to Game of Thrones or some other fantasy story.
But don’t give up! I am fairly sure that if I stick with the piano it will eventually bring me a lot of joy and satisfaction – but I KNOW that’s been true of investing.
Keep learning, and don’t be afraid to ask questions. You’ll get there in the end!
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