Common Uncommon Questions | Investing Well Without a Finance Degree | Is it even possible?

Continuing our series based on a conversation I had with a friend who is new to investing, today we’ll be getting into a simple question he posed. Is it possible to invest well without having studied finance in any organized academic setting?

What’s good family if y’all didn’t already know bhutane ocean was the last public holiday we get this year until chuseok so i hope you made the most of it in any case the silver lining here is that investors will be getting full business weeks for the next little bit meaning ample opportunity to figure out this whole investing thing you’re watching secure and this

Is part 3 of our common uncommon question series based on a conversation i had with a friend who is new to investing today we’re going to be addressing a key question that he asked me do you need to go to business school or major in finance to do well in the stock market i’m sure enough people have guessed the answer that i’ll be providing but today we’ll get into

Why now before we continue we just like to remind you that this channel is meant for general education purposes only and isn’t meant to replace the legal or financial advice from a paid professional with regards to this particular series of episodes we’d like to stress the importance of self-reflection a lot of this is opinion with illustrated reasoning but when

It comes to investments it’s always healthy to take a fair bit of skepticism regardless of the source that includes us i mean how else are you supposed to figure out whether or not something is right for you that being said no mention of any stock on this site should be taken as financial advice since we can’t know what kind of security best suits your needs and

Your goals how well we’d love it if you could subscribe to this channel like this video and stick with us as we explore ways to figure out whether or not a given asset is right for you for anyone who’s been with us for time already thank you from the bottom of our hearts i really hope that we can continue to contribute to whatever it is you’re trying to achieve

In your personal financial life now let’s get to it all right so today we’re asking the question do you need a finance degree to do well in the stock market and the answer to this that we will be providing today is no all right that’s it for me this week now i’m playing i mean kind of real talk the question of whether or not somebody can do well in the market

Without a degree in finance is not a particularly difficult one to answer but as with anything it comes down to context the main question to ask when aiming to inform your answer in this case is what does doing well in the market mean to you we’ve explored the concepts of financial goal setting in a previous video from our personal finance series which you can

Link to in the top right hand corner of the screen right now but i’m going to draw from ramit sethi’s book i will teach you to be rich in which he asks the fundamental question what do you want to do with your wealth now the answer to this question more than any other answer can help direct your goal setting and by extension your expectations of what doing well

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In the market actually means are you simply trying to get an average market return since they’ve historically been more lucrative than simple savings accounts then you objectively don’t need a business degree or even an understanding of a fundamental definition of terms like p e ratio or enterprise value or or even know the difference between revenue and income

Just commit to an etf buy in at a scheduled regularity regardless of the price and hold on to it for 30 years and you’re breezy based on historical precedent now are you trying to double or triple the market in the short term to cop a lambo or finance a vacation well you don’t necessarily need a degree as evidenced by the massive windfall retail investors cashed

In on last year from stocks like tesla gme amc and even nicola before it got exposed but as anyone can step up to a blackjack table with a simple and fundamental understanding of the rules beat the dealer win big so too can any waste man dump their wife’s boyfriend’s christmas bonus into a stock they know nothing about and still come out 10x the fundamental

Consideration to be made shouldn’t have anything to do with having a finance degree unless as is the case with most professional degrees you aim to actually have a career in that field even still in an article by business insider in 2016 they revealed that although accounting business and finance majors were proportionally more common to find on wall street than

Any other major they still only made up about 40 of all employees surveyed that is to say even if you want a job on wall street you don’t necessarily need a business degree so doing well in the stock market doesn’t necessitate you paying thousands of dollars for a degree in the first place particularly when there are thousands of resources online including us to

Help you learn the things that you would be learning in business school anyways the textbooks they use online for free the course syllabi online for free the networking well you’re gonna have to pay for that as with anything doing well simply comes down to one’s determination to learn about what they’re doing their ability to learn by doing and the development

Of their self-efficacy over the course of dewey but let’s not take advice from me i’m just a guy on youtube instead let’s get into two fundamental concepts by a couple of the world’s most famous and all-time great investors ray dalio and charlie munger now while dalio was most famous for his work on principles available in book form or in short form for free on

His youtube page though i do suggest that everyone read the book since it’s a tremendous work one concept that he focuses on is a particular paradigm called the pareto principle this is also referred to as the 80 20 principle but it essentially argues that 80 of outcomes originate from 20 of inputs before digging in remember that this isn’t a law or anything but


Rather a way of articulating that a vast majority of outputs correspond with a vast minority of inputs whether positive or negative so for example there’s a commonly stated rule that eighty percent of a company’s revenues come from twenty percent of the company’s customers it’s why repeat customers are so highly valued when compared to one-time customers and

A concept that was exploited by amazon in the early stages where they consistently took losses on sales of their items in an effort to establish repeat customers thus for companies to at least tread water they could simply cater to their core audience of repeat customers who make up a vast minority of their customers and chill with that now this is all fun and

Interesting but we’re not out here running a business we’re just investing so how does dalio apply the pareto principle to investing well dalio is big on being a generalist and he essentially generalized the concept into a life principle in applying the 80 20 world to life dalio stresses the importance of remembering the 80 20 rule and more importantly knowing

What the key 20 is quoting from the book the 80 20 rule states that you get 80 of value out of something from 20 of the information or effort it is also true that you’re likely to exert eighty percent of your effort getting the final twenty percent of the value end quote if we’re to apply this to investing then the majority of positive outcomes are derived

From identifying and exploiting the most important twenty percent of the effort needed to make those gains so for example for jack vogel’s acolytes the most important 20 of investing comes down to identifying the index etfs with the lowest fees that’s the minimal effort that will set them up for the majority of their desired value over time the final 80 of the

Work would be adhering to dollar cost averaging into them over the course of 10 20 30 40 years now this may sound easy when thinking from a theoretical and statistical perspective but sticking with an etf while watching others rake in massive gains on short term plays can be a major struggle bust still the pareto principle applies here when it comes to stock

Picking it’s a similar thing as an investor identify the key twenty percent of effort you’ll need to put in and then do that for value investors it can mean simple research to better understand the general situation of a company and screening stocks based on certain carefully selected ratios for momentum investors it could mean learning how to identify momentum

And volume patterns and applying it consistently over time in any case simplifying a process based on an identification of key expectations can help you do well in the market consistently as dalio says any damn fool can make it complex it takes a genius to make it simple luckily when it comes to investing the geniuses aren’t hard to find and among the investing

Geniuses there’s one who everybody seems to hold in the highest regard charlie munger if you don’t already know who charlie munger is he’s been warren buffett’s partner at berkshire hathaway for decades and his philosophy is simple it’s very difficult to be a genius but it doesn’t take a genius to not be a complete idiot quote it is remarkable how much long-term

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Advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent end quote now monger more than anybody that i’ve read or listened to stresses the importance of limiting one’s susceptibility to what he calls standard stupidities how do we do this well it depends on who you ask to help you better identify standard

Stupidities it might help to read books on psychology like daniel kahneman’s thinking fast and slow as well as investing books by investing greats like peter lynch’s one up on wall street manish papras the dondo investor and jack bogle’s the little book of common sense investing or you could as is common in this day and age simply watch a bunch of youtube clips

That summarize the points of these books and develop your own amalgamation of the knowledge provided to summarize to do well in the market you really don’t need a business degree or to go to business school what you do need though is the capacity to learn unlearn and relearn as well as a determination to do so textbooks are there for free but if you’d rather

Distill it down to that essential 20 it may be best to simply absorb the knowledge of the world’s greatest investors and emulate them to the best of your ability when it comes to investing or doing anything well monger has a similar adage take a simple idea and take it seriously and the ideas in this video well they just happen to be the ones that work for me

Now as much as i’ve argued against the need for it over the past 10 minutes if you are thinking of doing a stint in a post-secondary business school but are unsure of whether or not it’s right for you harvard business school online offers a three-course 10 to 12-week program primer called the core program aka the credential of readiness program for around 2 200

Us dollars i haven’t done it but it looks like a pretty good low cost option to figure out whether or not business school is right for you in the first place alright that’s really it for me i hope that nobody misinterprets this as anti-business school propaganda i can do that in my sleep but as i’ve said before it’s not the paper in your hand but the knowledge

In your head that makes the real difference i know enough people who pulled a 4-year drunken sleepwalk through undergrad and still walked out with a degree and i’m sure you all do too if that’s not enough evidence i don’t know what to tell you and to top it off here’s a little bit of unsolicited opinion everybody knows that the value of degrees is dropping but

That’s not because the demand is low it’s because the supply is getting really high do without what you will hi fam think of doing a new what we’re watching this week so keep an eye out because i haven’t done that in a while otherwise have a good one

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Common Uncommon Questions | Investing Well Without a Finance Degree | Is it even possible? By Sekki Deul