Today’s blog post is by Main Street Trading. Main Street Trading is an industry analysis site thriving to bridge the gap between Main St and Wall St. Their goal through Main Street Trading is to expand non-professional interest in investing, while showing Main St how to capitalize on the rapidly changing financial markets.
Even as a business student, modern financial literacy is something that is not encouraged enough as an undergrad. This makes the transition into Corporate America that much more difficult for today’s recent college graduates. The value of financial literacy is often underestimated, but there are a number of topics to ease this grueling transition. These various topics are not complex, although they are not taught accurately in the standard curriculum. Amongst these topics are skills, misconceptions, theories, and most importantly, motivation to thrive in the world today.
Development and Innovation
Our generation always wants the next best thing. Innovation, development, and entrepreneurship are more prominent in our lives than anything else. We have created companies that bring people together across the world, sites to share complex ideas in less than 140 characters, and applications to share valuable moments in less than 10 seconds. Our generation is thriving in incredible ways, and we are making money doing it.
What is it exactly that holds us back from innovation, development, and entrepreneurship? Lack of knowledge? Experience? Time? At this age, there is simply no excuse for this. The majority of students go through school studying, taking exams, and reading books, but do not learn anything. I have personally met a number of students who expect success to come immediately upon graduation.
Unfortunately, “success” only comes before “work” in the dictionary.
From experience, I know that students will come up with any excuse they can for not investing in themselves. It’s way more fun to skip class and start drinking at 2pm on a weekday or tailgate for a big football game than to take the time to learn and add value to yourself. To the contrary, the latter does teach the valuable lesson of time management, which is crucial during the transition from college to Corporate America. Yes, a corporate job can entail seemingly immoral hours, endless nights, and hopeless weekends, but this promotes more efficient usage of time.
Lead in a World Where Others Lag
Before going to college I was told by a mentor of mine that
I can work for 4 years at a university, then, party for the rest of my life, or party for 4 years and work the rest of my life.
I found this to be very true very fast. Did I work for 4 years? No, but I do see the effects of this being out of college now. Luckily, the first few years out of college are still considered to be a learning period, which allow university students to become students of the world around them. During this period, a crucial decision is made. Do you go through the motions at work (assuming you thrived enough to find a job out of college)? Or do you take the time to invest in yourself, become an innovator, and lead in a world where others lag?
Move away from home, start a company, a blog, an app, get away from your comfort zone, and take a risk before it’s too late. At this point in our lives it’s okay to start over financially if something were to go wrong. After one year of work out of college, one can only have saved so much money that it would not be impossible to save that same amount again. At age 40, this might be a different story. However, now is the time to take a risk. If it doesn’t pay off, there’s nothing wrong with that. Not all risks pay off, but the ones that do are well worth it.
The Truth about Financial Literacy
A major step for a number of young working professionals is to become financially literate. In school, we learn financial literacy as opening a savings account, never investing in equities, issuing safe credit cards (if any), and strictly investing in the lowest risk mutual fund we can get our hands on. The misconception here is that although these are all considered very safe ways of demonstrating financial literacy, these are more tailored towards the parent of three saving for a new house and enough to send their children to college. These do NOT tailor towards the recent college grad with minimal expenses, no spouse, and no children. Despite what we are taught, and what your financial advisor may tell you, the handful of years after college are meant for taking financial risks.
A few years ago a number of coworkers and I were given the opportunity to invest in an IPO. It was a company very popular at the time, and we were able to reach out to investors, friends, and family to see if they wanted to give this IPO a shot. I approached a number of people from a business related organization I was involved in to see if they were interested. A few were, but they were skeptical. There was nothing in it for me besides my own investment. This was just a valuable, uncommon opportunity I wanted people to be aware of. Most people were uncomfortable putting in a larger amount of money, typically only three figures, rarely four. At the same time, there were students learning that an “aggressive” return on investment is 6-10% in one year; however, they were still prepared to lose 100% of their investment. As a new financial professional and statistician, those numbers just don’t make sense. Understanding this would allow one to be completely comfortable putting down a reasonable amount for this IPO. Although a lot of people were skeptical, this ended up returning over 30% in one day and over 300% in 6 months. This was a rare event and does not happen everytime, but it is not impossible. People were cashing out returns for one day that would generally take a risk averse investor years to make. Most simply put if you’re willing to risk $100, risk $100. Check out some of our other trade ideas here.
Invest in Your Future, It Deserves Your Attention
So, you might now ask why is this the time to take more risks? I just graduated and I need to start saving, I can’t be investing in anything but a savings account or an IRA. Why should I be more risk prone in a risk averse world? Our take on this dilemma is that young working professionals should do something now; do something today to make life better 10+ years from now. As previously stated, it’s smart to save and have savings. However, we promise that there are no millionaires out there who made a killing in their savings account with an interest rate of 0.001%.
"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." -Robert G. Allen; Investment Professional and Author
The viability of saving accounts and low risk investments is diminishing around the world as well. For example, 5 years ago the interest rate in Ireland was over 17%. A few weeks ago, rates in Ireland went negative for the first time ever. This means that in order to have a savings account you must pay the bank to hold your money.
“Diamonds aren’t Forever”
It is crucial to act on opportunities that present themselves to you. Unfortunately, some opportunities don’t last forever. Majority of the time, the best opportunities don’t allow you the time to think twice about it, sometimes not even once. An amazing opportunity today could be completely gone by tomorrow given today’s rapidly changing markets and headlines. This being said, it is also important to prepare for the unexpected: have an exit strategy. If you’re starting a company, know when to get out. If you’re investing in a basket of stocks, know when to cut your losses. At this age, there is no excuse for not taking risks. Worst case scenario, you lose the small amount of savings you have. Mark Cuban took risks when he was young, and he took them often. So often that he was living out of his car, while eating ketchup and mustard sandwiches.
“The transition from college to corporate america was a difficult experience for me. I had worked hard to get an offer from my top choice company, but quickly realized that the position wasn’t what I thought it was going to be. I decided to take a step back and figure out if this was right for me. With the help of my mentors, I decided that it didn’t make sense to stay in a position where I didn’t see myself long term. Looking at the big picture, I decided to take a risk and pursue my dream to become an entrepreneur. I am now working more than ever, but I’ve met a number of valuable contacts along the way and have learned more than I imagined.” -Stephen S Oh; Head of Trading & Operations at Main Street Trading Trader, Innovator, Developer, Former J.P. Morgan Analyst
The Difficult Truth for Main St Investors
Not all financial professionals work in their client or investors’ best interests. For example, your company may set you up with a financial advisor or financial planner. These occupations get paid even if you lose money. They will do absolutely anything to collect their fee from you. They often request monthly contributions so they can start compounding the fees they are taking. At Main Street Trading, we strive to teach our users how to manage their own investments while promoting financial literacy for young, working professionals in the world today. I have no savings account, no mutual funds, no financial advisor; I’m not saving up to send a child to college, nor am I saving up to buy a house.
I’m investing in the rapidly changing world around us to create the best possible future for myself.
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