Investing is like buying shoes

by - September 27, 2016

So this article was inspired by Kristia van Heerden from JustOneLap. She shared on Twitter that she splurged on a pair of shoes and her guilt was eased it up by her DBXWD dividend payout of the same value.

 DBXWD (JSE code name) is still an ETF but it tracks investments in 23 different countries and in different companies. Those companies include Facebook. Johnson & Johnson, Microsoft, Facebook, Nestle, etc.

While talking to Kristia, I realised that investing is more like buying shoes. But the problem is, most women think that investing is hard and it's meant for investment professionals only. Maybe this was true in the 1900s but today we have so many platforms that can give us a slice of this investment pie. You can choose any pie you want, both literally and figuratively.

As women we are smart shoppers and very resourceful. From a tight budget, we are able to produce what we need, when we need it for our ourselves and families. We can “work around” any problem. We know how to find bargains and we seek opportunities to buy high quality products when they are “on sale.”

So for those of us who are fearful of the investment markets, we just need to take the same purchasing skills and instincts, and apply them to the financial markets.

So I started going through the steps that you take when you're buying shoes, then I compared them to the way investing works. The similarities are of epic proportion. πŸ˜‹

So here we go:

What's your plan?
Assuming that you are not doing this impulsively, you need to know why you are buying those shoes. I buy a pair of shoes to change my mood for the better. Putting on high heels evokes an inner feeling of confidence and sexiness like putting on a smile can make us feel happy. I am suddenly, taller, thinner and shapelier. That's my why. So what is your why?
The investment world works the same. You can never take a journey without knowing why you’re taking it. If you don’t have a strong REASON behind your actions - why you are you are investing - your actions are less likely to create quality results. If you do have a strong “WHY” you have all the FUEL you need to drive you forward – to financial success.

What's your current financial status?
Another thing to figure out before you buy those expensive shoes is:  will the purchase cause you real problems for you down the line? Meaning, will that pair of Louboutini set you back far enough that your children's school fees won’t be paid up at the end of the month? If so, it’s a good idea to let them be for now, and start saving a little every month so you can eventually buy them guilt-free (the best way!)
Since investing is a long term plan, it's important for you to determine your current financial situation with regard to income, savings, living expenses and debts. I know lots of women who have joined societies that are above their monthly pay. They sacrifice so much of their day to day and end up accumulating debt just to keep up. Don't do that to yourself. There are many affordable investments out there. Commit to an investment that you can afford.

What are the risks associated with this purchase?
Shoes in all their shapes and sizes have have some kind of risks associated with them. Flat shoes have no arch support whatsoever. All high heels boost the risk of an ankle sprain. Chunky heels can still put stress on the ball of the foot. Platform shoes and wedges tend to have rigid foot beds. Flip-flops offer very little protection.  This is the reason why you walk around the store to test the shoes first.
Similarly, there are risks involved with investing. When you invest, you make choices about what to do with your financial assets. Risk is any uncertainty with respect to your investments that has the potential to negatively affect your financial welfare. For example, your investment value might rise or fall because of market conditions  It is important to understand the types of risk that may impact your investment returns before determining and implementing your investment strategy. There are two things you should consider when thinking about risk - your emotional willingness to accept risk and
your financial ability to absorb loss.

Where to purchase your goods? 
 As with any purchase, it pays to price-shop a bit before biting the bullet. With so many gorgeous shoes, you will check out various department stores, boutiques, flea markets and every online shop you can find to find that perfect shoe you are after. This process will help you find the right shoes that fits your style.
It's the same drill with investing. Research, research, research.  Understand before you invest.  You don’t have to be a genius to do it and you can never ask a dumb question about your investments. This can help you understand what you are buying and avoid potentially costly mix-ups or mistakes.

Are this shoe a one-season wonder?
Fashion comes and fashion goes. And because of this there is a chance that, after the season is up and the luster starts to fade, you might start to feel that your splurge was partially due to the immediacy of having something covetable, rather than having something you absolutely adore. Off course not every one of your purchase will be "classic". Still, if you have to invest you need to invest in shoes that will benefit you in the long run.
In the investment world you'll hear a lot about "hot stocks". Just because your friends/guru/coach tells you about a particular stock or an investment that made them money it doesn't mean that those stocks or investments will be your ticket to wealth.  That is why doing your homework is key and sticking to your strategy. Don't fall for the latest "hot stock" trends. They will cost you dearly.

Does the shoe fit? 
Even if your friends recommended a particular pairs of shoes, you wouldn’t buy those shoes based on their size, would you? Accept if you are the same size. It would be foolish to spend your hard-earned money on something that won't fit you?
It's the same as investing. Don't copy your friend’s portfolio holdings without taking into account your own personal risk tolerance. Your risk tolerance should depend on your current financial situation, your age, career, and what you want to accomplish. The best way to understand your risk tolerance is to gather information based on your experience and the experiences of others and to use financial planning information sources. The risk of your portfolio should be close to your risk tolerance — the same way a shoe should be the same as your feet's size.

Purchase those damn fabulous shoes already
With the many shoe brands that are available to you, choosing the best shoes can be the most difficult part of it all.  With shoes though it tends to be easier because we know what we like.
The investment world can be a little tricky when you are starting out.  More information does not necessarily lead to a better decision-making.  Still, don't be stuck in the research phase. Gather enough evidence and make a decision. If you’re wrestling with some aspects of it, consult a your financial advisors. They can help clear the fog for you.

So you see, it's possible for you to invest if you look at it from the way you handle your day to day purchases. Trust me when I say the same principles apply. And if you don't know, ask, the same way as you will ask the sales person or trusted friend before you make that big purchase.

So yes, investing is like buying shoes but only better because there are possible returns that means you can buy more shoes. When you allow your money to work for you, you will be able to buy those shoes without feeling guilty. And that's a great feeling to have all day, every day!

Still feeling intimidated? And which step did I forget?

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