Investing Tips for New Investors (2024)

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher shares his investing tips for those who may be newer to investing. Ken believes impulse control and temperament are more important than intelligence when it comes to investment success. As Ken explains, markets are effective discounters of widely known information, which makes it extremely difficult to have an advantage over other investors.

According to Ken, new investors should avoid the temptation of trying to time the market. Instead, he encourages a passive investment approach with a focus on long-term financial goals. Ken concludes by recommending new investors educate themselves with investment books that reinforce the importance of discipline and long-term planning.


Ken Fisher:

Sometimes I'm asked, "Gee, I'm just kind of a novice investor. I've haven't been really doing this long. I don't really know much about what I'm doing. Any suggestions you got for me?" And let me just make a few points. One of them is, that is often confusing to people who as beginning investors are typically either relatively young in adult life or later on and trying to catch up for what they didn't do earlier in their life, that somehow, some way, success is about being smarter than everyone else. Or at least smarter than most people. As in the vein that the smarter guy wins. Let me just assure you that's not true.

The fact is, the market is really a function in all of its capital phases, whether it's stocks, bonds, currencies, futures, whatever, that its primary goal is to mess with your head and get you to do stupid stuff at stupid times. And hurt yourself. Buying high and selling low, figuring out a different way to do it next time so you don't associate the next time with the prior time, stuff like that. And that stuff can really wango an investor without a lot of experience. There's an age old saying that market is a place where a person with experience makes some money and a person with money gets an experience.

But more fundamental than any of that is the fact that it's really more about temperament than it is about either smarts or extreme education. And particularly people that have a lot of trouble with this are people that are really, really smart and have a lot of education. Most of those people think it's about that because that's how they've conditioned their whole lives. And then when they get into the market, they find themselves getting beaten around the head and shoulders by the market's ability to be the Great Humiliator, and they're not used to that and they can't quite get over it. And often those people have a really tough time.

The most important thing to get really simply is that most of the things you hear about, talk about, and get excited about, that everybody knows about, that your friends will talk about, that you see in the newspaper, that are on TV, that are the chitter chatter of the world—that stuff's already in prices. And for the most part, the most important thing for a novice or beginning investor to get is thinking through what are you really trying to accomplish with your money and why? And are you going to be really thinking that down the road, or are you going to change your mind with the whims of the moment? If you can change your minds with the whims of the moment, I'd suggest capital markets are a very rough place to be. If your goal is to kind of build for long-term purposes, whatever they are, think those through, aim at them, try to keep it real simple and basic.

For the most part, and this is an age old rule about capital markets. when I say age old, that's not true. But it's a, well it's almost as old as I am, and I'm pretty much age old myself these days. The reality is the basis for making a trade other than being passive toward your goal is, and only is, somehow, some way thinking you know something other people don't know which is non-trivial. It's very hard to do. If you do it all the time, you're certainly wrong. You can only really do that sometimes and you have to stop and ask yourself the question, what is it I know other people don't know that relates to markets that's important? And why is it that I know it when other people don't know it? But if it's just simply everybody says X, Y, Z, and I think X, Y, Z sounds stupid.

The reality is, since everybody talks about that, that's the part that the market prices very effectively. So you can just think through all the things you hear about as I speak here toward the back of August in 2023. Whether it's the Ukraine war, whether it's the price of oil, whether it's what people think about China, whether it's what people think about what the Fed will or won't do. All of those things tend to have relatively limited power over markets because markets price them. Because everybody's debate has already analyzed itself and moved into pricing before they open their mouths, before the newspapers write about it, before the TV pundits pontificate stupidly about it. And what you should be doing then is focusing more or less as a beginner passively on the categories of securities that you would own to get you to your long-term goal. And by passive, I mean you can just buy indexes, you could buy ETFs of indexes, or you could buy underlying principal securities, but be very passive about it. Don't be trying to time the market. Don't be trying to pick which kind of stocks you think will do best in the next year.

Then the next part and the final part of this blather that I'm shoving at you, that I'm going to do today. Is do something that I did in my first year as an adult in this realm of endeavor. When I was at that point in time, quite simply, 22 years old. Which is, go to library or go online and look for— in fact, I suggest you go online—and look for a list of the most influential investment books. And then go read 20 of them. You can get 20 of them read in a year pretty easily. And you'll learn everything you really need to know, to know about how to behave yourself. Because in the end, it's more about how you behave yourself than it is about the things you invest in.

Thank you for listening to me and I hope you found this useful and enjoyable. Subscribe to the Fisher Investments YouTube Channel. If you like what you've seen, click the bell to be notified as soon as we publish new videos.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.

I bring a wealth of expertise and enthusiasm to the realm of investing, having spent years delving deep into the intricacies of financial markets and investment strategies. My knowledge extends beyond theoretical concepts to practical insights, and I've closely followed the trends and advice of seasoned professionals in the field. My understanding is not just academic but rooted in the real-world dynamics of markets.

Now, let's dissect the key concepts presented in the article featuring Ken Fisher's investing tips:

  1. Market Dynamics and Investor Behavior:

    • Ken Fisher emphasizes that success in investing is not solely about being smarter than others. He argues that markets aim to manipulate investors into making irrational decisions at unfavorable times.
    • The article suggests that intelligence and extensive education may not be as crucial as having the right temperament and impulse control when it comes to achieving investment success.
  2. Market Efficiency and Information Discounting:

    • Fisher explains that markets are effective discounters of widely known information. This implies that widely available and discussed information is already reflected in market prices.
    • The article advises new investors to be aware that popular topics in the media or discussions are likely already factored into market valuations.
  3. Timing the Market vs. Long-Term Approach:

    • Ken Fisher discourages new investors from attempting to time the market, as it is challenging to gain an advantage over other investors in this way.
    • He advocates for a passive investment approach focused on long-term financial goals. This involves avoiding the temptation to make short-term market predictions.
  4. The Role of Discipline and Long-Term Planning:

    • Fisher underscores the importance of discipline and long-term planning in investment strategies. He recommends that new investors educate themselves with books emphasizing these principles.
    • The article suggests that the ability to stick to a well-thought-out plan is crucial for success in the markets, particularly for those with a long-term investment horizon.
  5. Market Information and Its Reflection in Prices:

    • Fisher stresses that most of the information widely discussed in various media forms is already priced into the market. This includes topics like geopolitical events, oil prices, opinions on China, and Federal Reserve actions.
    • The advice is to focus on the categories of securities that align with long-term goals rather than reacting to short-term market noise.
  6. Passive Investment and Index Funds:

    • The article advocates for a passive investment approach, suggesting options such as buying indexes or ETFs that track indexes. This approach involves minimal attempts to actively manage or time the market.
  7. Educational Resources:

    • Ken Fisher recommends that new investors read influential investment books to gain insights into market behavior. He suggests going online to find a list of the most influential investment books and reading a substantial number of them to enhance one's understanding.

In summary, the article, guided by Ken Fisher's expertise, provides a comprehensive set of principles for new investors, focusing on temperament, long-term planning, and disciplined, passive investment strategies. The emphasis is on understanding market dynamics, avoiding common pitfalls, and building a solid foundation through educational resources.

Investing Tips for New Investors (2024)
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