The Importance of an Investing Mentor

When I was 8 years old, my mother started teaching me about mutual funds. I had no idea what they were at the time, but she was learning about them for the first time, and saw how important it was for children to know how they worked.

She encouraged me to start mowing my neighbors grass for some extra money that I could invest. It sounds like child labor, and it was, but I am incredibly grateful for her financial influence in my life. She taught me the value of hard work and the importance of steady investing over time, even if it is in small amounts.

I continued to invest in mutual funds through a traditional IRA over the next 15 years, and my wife and I were able to withdraw a substantial amount of money to put a downpayment on our first home when we got married at 23. Thanks Mom!!

Why You Should Have an Investing Mentor

Most of you reading this blog post have a much greater financial knowledge than a large majority of the world. You understand personal finance concepts, and you are likely already investing your money wisely.

However, none of us know everything, and there are many investing principles that deal with emotions rather than numbers and hard data. For this reason, you should find an experienced investor as your investing mentor.

This person should be someone you respect personally and financially and who has been investing for decades. In most cases, the longer they have been investing the better.

The goal is to find someone who has seen multiple swings in the market, has seen “hot stocks” come and go, and has seen the power of steady investing over the long term. This insight takes years to learn, and as much as we try to teach these principles in the personal finance blogosphere, it is much more meaningful coming from a mentor you respect.

An investing mentor will be able to help answer your questions about the details of investing. They can tell you the difference between a Roth and Traditional IRA, and they can tell you what a target date funds is, but their main worth lies in their investing philosophy. Just like a business mentor would help you create a mission, vision, and goals for your startup, an investing mentor will help you create your investing philosophy.

This philosophy should include a specific set of investing goals, how you plan to invest, the frequency you plan to invest, which investment vehicles you will choose, and how your investment strategy will change over time.  This is not done through a one time meeting. The goal is to form a long-term relationship with your mentor that will provide years of benefit for you.

The Warren Buffet Effect

Warren Buffet’s annual charity lunch auction is going on currently. You can see in this auction the power of a high quality investing mentor. Last year’s winner paid $3.5 million just to take six of his friends and sit down with Warren Buffet over a steak lunch! Warren Buffet is a pricey mentor, and I don’t suggest you pay for your mentor at all, but he has the characteristics of the investor you should target when seeking an investing mentor.

Warren Buffet created his empire by investing for the long term, and investing in solid companies that he saw value in. Buffet’s investing philosophy was created decades ago, and while I am sure it has been tweaked over the years, the basic tenets have remain unchanged.

Your investing mentor can help you do the same. No, they cannot teach you how to become the next Warren Buffet, but they can help you create an investing strategy that will guide you to your financial goals, and secure a safe financial future.

Do you have an investing mentor?  Have you considered finding one?