I started to improve my writing deliberately and intensively in 2015. Since then, I’ve noticed that not only my writing improved but also my investing returns.
Writing is the most important skill in the world because it has many beneficial side effects. One of the major benefits is that you become a better thinker when you improve your writing.
Let’s break down why that is and how you can improve your secondary skills when you improve your writing.
Here’s what’s usually considered good writing:
- Clear: When you read something, you don’t want to think, “What does this person mean?” Good writing is clear and unambiguous. It needs to be coherent, and the reader should get the point that the writer set out to achieve.
- Credible: A reader should believe the writer. Without belief, there’s no credibility. And a writer who’s not credible is not someone who can make an impact.
- Persuasive: The writer needs to persuade the reader to keep their attention. A piece of writing that’s clear and credible but lacks persuasion is like math. When you add persuasion to keep things interesting, it becomes art.
When you focus on these three aspects in your writing practice, you start thinking about clarity, credibility, and persuasion in all other areas of your life. Because writing is a collection of your thoughts, observations, and experiences, you always keep the three aspects of good writing in the back of your mind.
For example, when I write a journal entry, I still want to make it clear, credible, and persuasive. It doesn’t matter whether there’s an audience of one or one thousand, I always want to write well.
Let’s look at how good writing translates to good investing. When you want to invest your money, you need to convince yourself to take action. It’s like writing a sales letter to yourself.
Here’s an example of how I made the case to myself to start with investing in an S&P 500 index fund. I usually ask myself questions, and then I answer them.
- Why do you want to invest in an S&P 500 index fund? The stock market is one of the greatest wealth builders in the world. I want to let my money compound, but I don’t want to spend too much time and money on selecting financial opportunities. Investing in an S&P 500 index fund gives me direct exposure to the best companies in the US, in a low-cost way because the fees are low.
- Why is this something you trust? The S&P 500 has consistently generated positive revenue over the last 100 years. The odds are high it will keep generating returns for the next 100 years. In addition to that, the Standard & Poor organization actively manages the index by removing weak companies from the index every year.
- What’s the appeal? It’s simple, doesn’t demand time, the costs are low compared to other investment opportunities, and it works.
If I can’t explain the first question clearly, I won’t understand the investment opportunity. And if you don’t understand something, you usually never take action. This is true for everything, whether it’s asking someone a question or pitching your startup to a venture capitalist.
How often have you received an email or request from someone and you read it multiple times and still didn’t get it? Unfortunately, we don’t get any training in clear writing at school or in our careers. It’s something we have to work on ourselves.
The second question I asked myself is all about credibility. Can I trust this investment opportunity? And why should I trust it? Without trust, you will never put enough money into an investment.
The reason a lot of people I know (myself included) don’t pour a lot of money into cryptocurrencies is because most of them lack credibility. While Bitcoin and Ethereum score a lot higher on the credibility front, there are still many pump and dump schemes in the crypto world. For risk-averse people like me, that’s off-putting.
So when I speculate in crypto, I use small amounts of money compared to the money I’ve poured into the stock market.
Finally, an investment opportunity needs appeal. If someone says, “You should put your money in bonds and get a 2% return,” I’d say, “See you later.” The opportunity needs to be something that tickles you a bit. You should see yourself getting decent returns in the long run.
Anything below 5% doesn’t do it for me. I also don’t need big returns because I rely on my career and many digital products I’ve created for consistent income.
Investing starts with writing
In the past, I’ve made investment decisions without putting my thought process into words. Those investments never worked out well for me.
In addition to passive investing, I also allocate about 10% of my funds to trading individual stocks. For every stock I buy, I write a case to buy the stock. I use the same questions I mentioned earlier.
It’s something I highly recommend to any person and investor. If you go over your investment decisions in your mind, you miss the bigger picture. When you write down your thoughts, you find out whether you’ve done your homework or not.
If you can’t answer the questions in a clear, credible, and persuasive way, it means you probably shouldn’t allocate money to an investment opportunity.
But if you did answer the questions in a way you’re excited about putting your money to work, you at least know that your decision-making process was correct. And that is the mark of a great investor.