So-how about it, can you tell me, should I be investing?
Yes- absolutely you should be investing…
Good simple question…
…actually, it’s a terrible question. It’s really an oversimplify question. And one that everyone seems to have, and that the internet seems to be able to answer with a resounding yes.
The question, Can You Tell Me, Should I be Investing, creates a false dichotomy.
There is much more nuanced to it than just a yes or no answer regarding whether or not you should be investing. We don’t live in an oversimplified binary world- at least I don’t.
Sometimes you need to take a step back from a question that at first seems so simple- you need to avoid narrow framing these simple questions. Narrow framing is when we think the answer to a question is simple, but it is only simple from our point of view. We fail to look at the question from other people’s perspective.
You should always beware of narrow framing when faced with a binary type of questions with a yes or no answer. That’s exactly what the question “Can you tell me, should I be investing?” creates. It’s a simple yes or no question- unless we complicate it. So let’s do that. Let’s complicate the question and look at all the details.
Can you tell me, Should I be Investing?
First- what do you mean by investing?
This really depends on who’s asking the question- You may think that you can define what investing is, but that is the definition of investing from your perspective. Some people have a completely different idea about what investing is.
You may not think that buying art is investing, but it can be. You may not think going to university or trade school is investing, but it can be. Buying a car may not be an investment to you, but it is for an uber driver or real estate agent- who wants to portray a certain image, it is. (in reality its a piece of capital in those situations, but you get the idea).
There are many forms of investing, such as;
- ETFs and funds
- Real estate
- Term deposits
- Savings account
- Precious metals
- Art and collectables
- Bitcoin and cryptocurrency
And it doesn’t even have to be financially based investing- the question could also be about investing;
- Social capital
- Personal Fitness and health
Can you tell me, Should I be investing?
Now that we have tackled the word investing, what about “should I be investing”?
Should I be investing, and what should I be investing in, will depend on what are you investing for? Your investment goals. And it also depends on whether your investing money or time. Generally, when asked this question you assume that the asker is talking about investing for retirement, but there are other goals;
- Early retirement
- Financial independence
- House deposit
- Start and expand a business
- Reach a financial goal
- Improved future earnings
- Just to grow your money
- Saving for an expensive purchase
Side note here- I like to look at saving and investing as the same thing. Saving is just a type of investment with very low risk and no return. Or if it’s in a savings account, you might get a little return that may keep up with inflation- in which case your savings is really an investment.
Can you tell Me, Should I be investing?
Who is “me”?
The “me” part of the question is just as important as the investing part of the question. Who you are will dictate what you invest in and for what purpose. You could be;
- a self motivate person
- a skilled person
- an employed person
- a self-employed person
- a rich person
- a poor person
- a young person
- an old person
The answer to the question can be different depending on what kind of person is asking the question. A self-employed person has far less to gain from investing into KiwiSaver than an employed person, as a self-employed person doesn’t really get the employer match.
Can You tell me, Should I be investing?
Next, who is “you”.
The answer to a question is almost always dependent on who you ask it to. I’m not talking about maths and science questions here- the answers to scientific questions are universally the same- and No! flat-earthers are not scientists.
Questions whose answer could depend on life experience will change depending on who you ask them. If you asked someone who lost their life savings after 2008, or 1987 market cash weather you should be investing in the share market their answer will probably be different than say my answer- as I am someone who has never experienced a market crash for myself- except for recent events…
Asking a property investor about whether or not you should be investing in real estate will get you a different answer than asking a share or dividend investor. The property-share market investing is a big debate.
So the answer to the question is likely to be different if you ask a;
- financial adviser
- share trader
- real estate mogul
- a banker
- a careers adviser
- a DIY investor
- a flat earther
- a conspiracy theorist
Alternative forms of the same question
Now that we have expanded the question “Can You Tell Me, Should I be Investing” it can mean a lot of things depending on who you ask, who you are, what you are planning on investing in, and what you are investing for. Here are some examples of the same question.
- Can you, the financial adviser, tell me, an employed person– should I invest in ETFs and Index funds for my retirement?
- Can you, the share trader, tell me, a poor person– should I invest in Realestate to reach my financial goals?
- Can you, a conspiracy theorist, tell me, a self-motivated person– should I invest in Bitcoin and cryptocurrency for my house deposit?
- Can you, a careers advisor, tell me, a skilled person– should I invest my time to improve my future earnings?
- Can you, a real estate mogul, tell me, a self-employed person– should I invest in shares to expand my business?
- Can you, a banker, tell me, a rich person– should I invest in art and collectables to grow my money?
They’re all the same question- just with the nuances fleshed out- and the answer is not always yes.
There are many other questions in personal finance that also fall into this category of being binary narrow framing type question.
- Should I be in Kiwisaver?
- Should I be saving for retirement?
- Should I have an emergency fund?
Should I be in Kiwisaver?
Yes- the vast majority of Kiwis should be in KiwiSaver.
Some people may say that they can’t afford to be in Kiwisaver. Money might be tight for some, and 3% might be too much- but you should still try to deposit at least a thousand so that you can get the five hundred dollar bonus from the Government.
But there are also times when the answer is no. Self-employed people see fewer benefits by being in Kiwisaver than PAYE earners- because Kiwisaver was never designed with self-employed workers. The one major benefit they have is the government bonus.
Then there are employees whose employer may have a legacy retirement scheme or alternative retirement scheme which might be more beneficial than Kiwisaver. Arguably if this is the case for you, then there is no need to be in Kiwisaver as well.
Should I be saving for Retirement?
Just like Kiwisaver- the vast majority of Kiwis should be saving for retirement, and many do this through KiwiSaver. We can argue about whether or not Kiwisaver is enough to retire on another time. The point here is to answer the question Should I be saving for retirement. Overwhelmingly yes.
But- then there are times where the answer is no- what about an unfortunate case where you have been diagnosed with a life-threatening progressive illness- sad and unfortunate I know- but it does happen. If this is the case- saving for retirement may not make any sense.
The other part of this question that is nuanced is “saving”. The question is normally framed should I be saving for retirement- I think a better question would be whether I should invest for retirement. It’ll be hard to save for retirement without the help of investment returns.
Should I have an emergency fund?
Again- a question which on the surface leans to the answer yes. But then if you ask yourself what your definition of an emergency fund is- coupled with the type of person you are then the answer might be different is.
If the definition of an emergency fund is to have a line of revolving credit or offset mortgage, and you are a spendy kind of person- that might not be the best idea.
The types of questions in personal finance aren’t always a simple yes or no, even though much of the time they are formulated to be simple yes or no question. Generally, the answer should be yes, but they’re sometimes more complicated, more nuanced. So if you are trying to answer any of the above questions- and you don’t know the answer- you should broaden your options and ask many different people.