Here is the full transcript of Thomas Kehl’s talk titled “How To Start Investing—Responsibly” at TEDxHSGSalon conference.
In this talk, Thomas Kehl, co-founder of FINANZFLUSS, emphasizes the importance of self-education in personal finance and investing. He shares his father’s early mistakes in investing due to a lack of information, highlighting the accessibility of the stock market for ordinary people, not just the wealthy. Kehl discusses the transformative effect of financial crises, such as the 2008 recession and the COVID pandemic, on investment strategies and attitudes.
He notes the shift from traditional advice to do-it-yourself investing, aided by the abundance of online resources and communities. Kehl advises on learning investment basics, understanding the risks, and the importance of diversification and low costs. He warns against falling for seemingly advantageous financial products and emphasizes skepticism in finance.
Finally, Kehl encourages starting with small investments to learn and grow, underscoring the value of personal experience in managing finances responsibly.
Listen to the audio version here:
TRANSCRIPT:
Early Career and Personal Finance
My father started his career as an engineer in a time when the internet did not exist. Neither did the easy access to information on personal finance. He was earning good money and when accidentally an insurance sales representative came across, he signed a life insurance contract in order to put some money aside for later. His first encounter with personal finance and investing was at the age of 50.
He discovered that the stock market is accessible for ordinary people’s wealth creation and not only for the multi-millionaires. He learned that at a very expensive money guru seminar where he was told that even as a simple employee, he could become rich by investing in mutual funds. Certain products that were, and indeed are today, very expensive and often lack the promise of delivering superior returns, but they are one of the few opportunities to invest in the stock market in a diversified way. So he took a bold decision.
He borrowed money against his parents’ house in order to invest it in mutual funds. Shortly after, the dot-com market bubble burst. His funds lost in value and he decided to sell his parts. We as a family, we needed money and he was lacking education and experience on investing.
Financial Missteps and Awareness
By selling his parts, he realized huge losses on his investment financed with borrowed money. Financially it was a disaster, but how could he have known or done it better? This case is not an exceptional one. Hundreds of thousands out there share the same financial biography.
Unaware of the availability of financial education, we trust professionals and may fall for faulty advice. This raises questions such as, “Where do I start with my finances? Who is a trustworthy advisor? How do I not lose money on the stock market, but still can make my savings grow in order to close my pension gap?”
“How do I not mess it up? And is that even possible?” Yes, it is. I am convinced that the best money manager is you, by following some very simple but smart decisions. Let me first tell you why I am convinced that you can learn how to do your finances yourself and then how. Let’s start with the why.
Who is investing right now or put some money on the stock market? Who was already invested in 2020? Okay, that’s what I was a bit expecting. And in 2008? Who was already invested in 2008? Okay, very little.
2008 was my first financial crisis. Financial crises typically come with negative consequences, such as job losses, monetary losses and in some severe cases, even home losses like in 2008. But often they mark a turning point, changing the status quo permanently. As I said, 2008 was my first financial crisis.
At that time I was glued to the TV, watching stock market reporters fearfully describing how markets are crashing and banks are going bankrupt. I didn’t have any like-minded investors to whom I could talk, nobody to share my fears and no social community around me to support me in order to stay invested. I had no blogs or websites at my knowledge where I could have read how to behave in such a situation.
Twelve years later, another financial crisis struck, but this time it was different. I will tell you why. The COVID pandemic made the stock markets implode again. Up from February 2020, the stock market started or the stock prices started falling as sharply as they never did before in history.
The Rise of DIY Money Management
At that time, during my vacation on a Pacific island, I produced a video on why investors should not panic and why markets tend to recover after crashes. I was also sharing what I will be doing in this particular situation with my personal finances. More than 400,000 people saw that video. Back then, I had created together with my founding partner a community of people interested in financial education. Led by the pandemic crash, we started regular streaming in order to engage closer with our community.
And here’s the thing that changed. Unlike me in 2008, instead of fearfully watching their TVs, young people like many here started investing. They seized the opportunity. They took advantage of the 30% market drop in order to buy stocks cheaper.
The crisis was the beginning of a new generation of young investors who celebrated their stock market debut and took over control of their personal finances. So what was the shift between my father’s time of personal finance, my father’s era, and the post-COVID world? It was the time of the beginning of the rise of the do-it-yourself money managers. Now information is freely available and had replaced costly seminars.
Emergence of Educational Platforms
And communities stepped up where gurus once stood. When we started YouTube in 2016, it was the second largest search engine with a huge demand on educational content. Here are two examples. On the left side, you see a video of a math teacher explaining how to add fractions.
2.6 million people saw that video, only in the German-speaking environment. The second one is a video we produced on how the stock market works. Two million people saw that video. It was one out of 700 that we produced.
Today you could be enjoying your favorite Spotify music playlist. And with a simple switch within the same app, start listening to a finance podcast from your favorite Wall Street journalist or dive into an absolute beginner’s guide. Knowledge is now freely accessible so that you can deep dive into any topic. Learning about finance was never as easy.
But knowledge is not everything. The real value lies in applied knowledge. I had shared today the story of my dad who made the mistake of investing in mutual funds with borrowed money. I share the story today so that you are aware of the risks that are associated with that.
But so as I do, hundreds of thousands do it out there as well. They share their stories, experience reports, and case studies openly on platforms like Reddit, YouTube, Discord, blogs, podcasts, newsletters, you name it. You can start following them. You can now learn from the mistakes others have done so that you can avoid them.
Another thing that has changed is that the cost of financial products fell to a record low. In the past, my father had to go to a physical fund shop in order to buy those funds and had to pay a high four-figure commission. When I started investing, the costs were much lower but still at 20 euros per order. Today, brokerage is almost free, permitting you to start collecting experiences with a very tiny budget, let’s say 50 to 100 euros or francs per month.
Navigating the Financial Landscape
But broker commissions is not the only thing that fell. Also, newly very cost-efficient funds had arisen. ETFs, for those who know me, my favorite financial product, had been conceptualized not for us private investors but initially for professional asset managers. This is usually a good sign as professionals tend not to fall for the shiny marketing bling-bling but ask for high liquidity and low costs.
Participating in the financial market had never been as accessible, transparent, and social before. So this is why I am convinced that you can manage your finances by yourself. Let’s now talk about the how. How not to mess it up.
Practical Advice for Personal Finance
Now that you have access, learn the basics. Use the aforementioned tools for yourself in order to get the information you need for your particular situation. You are young, you have time, you want to grow your wealth or close your pension gap? Learn how to invest in the stock market in order to beat inflation.
Key learnings here are diversification of risk and keeping costs low. You want to live in your own little house? Then learn how to save for it and how to avoid the main financing traps. You want to get out of debt?
Learn how to create a sustainable budget so that you can refund the debt and never need to borrow again. The more you learn, the least you will mess it up. Second, follow the money in order to unveil conflicts of interest because they are everywhere in the financial world.
Staying Informed and Skeptical
A financial advisor offering you a free insurance and investment check has a high incentive of selling you a product from the company he represents, regardless if you need it or not. A bank advisor will not be able to advise you on the best ETF strategy as he can only advise you on the products the bank asks him to sell. And the mortgage lender is disincentivized to tell you if your real estate project might be too ambitious for your financial situation. Follow the money and ask who benefits.
Third, always exercise skepticism in finance, especially when faced with an offer that seems too advantageous. Did you ever hear of this revolutionary, once-in-a-lifetime opportunity with no risk, high reward, and at the same time inflation-protected and tax-free? This product does not exist outside the marketing world.
Or did you hear of this fancy startup based on blockchain that will democratize finance? Democratizing in this context often means making accessible to everyone. But start asking what has been made accessible. Buy now, pay later startups, for example, give you an easy access to consumer credits right at the checkout of your favorite e-commerce website.
Embracing Financial Responsibility
Did you ever shop something online and get the suggestion, “Do you want to pay what you’ve bought in two or six or twelve months?” This is exactly this. In my view, there is no need for an easy access to self-indebtedness via consumer credits. Others provide you trading without fees in a highly gamified app, high-frequency trading with risky products made accessible for everyone. This usually only benefits the brokers, as more than 80% of retail traders lose money. Brokers benefit the more you trade, you risk losing more.
Don’t get me wrong, revolutions in finance benefit many in the emerging nations. But in Europe, you should be wary, because often the innovation is not in the product, but in the marketing strategy, making you buy something.
Finally, don’t be afraid of doing mistakes, because if there’s one guarantee, then the one that you will not make it right at the first try. This is usually true for any sports, for a baby learning to walk, and for your finances. What makes the difference is the application of knowledge or your personal experiences. So start applying soon what you’ve learned.
And if you’re hesitating, just reduce the budget of your decision. You’re afraid of investing 5,000 euros in the stock market? This is totally normal. Just reduce the budget to, for example, a few hundred or to a monthly savings plan in order to see what happens. Taking over control of your personal finances might be one of the most impactful decisions you could possibly take.
It comes at a risk, like many things in life. Today’s landscape is shaped by vast resources, abundant knowledge, and supportive communities. This is how you navigate wisely. Thank you.