DIY financial investing: The b


DIY financial investing: The bigger picture

This is the tenth article in this series of DIY financial investing.

DIY financial investing: The b


In the first article What is a financial investment? we made the distinction between financial investments and other kinds of investments.

Let me again indulge in a bit of philosophy to look at the bigger picture, so that we can ask ourselves not only how to invest, but why to invest.

Maslow’s hierarchy of needs

In 1943 Abraham Maslow proposed his well-known hierarchy of needs. The idea is that a healthy individual would first fulfil his most basic needs like those of food, sex, shelter etc. Thereafter the individual would move on to higher needs like social belonging, and lastly to self-actualisation.

I honestly feel that our consumer society has to a large degree become stuck at the most basic levels. We keep on striving for more possessions: branded clothes, newer cars and bigger houses. And we keep at it, even when many of us have much more than what we need.

This pressure to consume is enormous, and even our most intimate relationships are marked with days for buying, like Father’s Day, Mother’s Day, Valentine’s Day and Christmas.

A good friend at a prominent financial institution explained it to me like this: “These days people do not buy things, they are sold things.”

Ultimately, I think, we are poorer for it, and this endless material chase denies us the opportunity of acquiring higher, non-material forms of wealth.

Money as a tool

There is, however, lots of research to indicate that capitalism has created societies where people are generally happier and where they are healthier and live longer. The twentieth century has seen various experiments with communism and socialism fail spectacularly, and in this century Venezuela did the same.

In this regard, we can see money, and the financial system, as a tool. Just like the wheel, it is something which can be used in countless destructive ways, but it can also be used to great benefit. The tool itself is neither good nor bad, and neither money nor the wheel has to be the root of all evil. (The Ascent of Money: A Financial History of the World is a 2008 book by Harvard professor Niall Ferguson which I can strongly recommend.)

The balance

Much of life is, of course, a balancing act. One can easily lose oneself in one’s smartphone and social media. But in the right measure, it is part of a wonderful life. Similarly, it is easy to be obsessed with money, how to get it and how to spend it.

But in the bigger picture, we should realise that many of us have lives which previously people could only have dreamed of. By being critical of the obsession to consume, but by also being aware of the power of financial tools, we can have a well-balanced life with more free time, earlier retirement and fewer money worries than what most people realise.

The stock market is probably the most powerful investment tool at our disposal. Next week we start to look at shares.