Are you an ultimate beginner when it comes to investing? You’d like to start but don’t know how?And the world of finance just seems overwhelming? Don’t worry, you're not alone. I was exactly like you a few years ago so in this video, I’m going to walk you through the Pentagon Method, the 5-step strategy that helped me start and continue investing, and achieve financial independence. Whether you're just starting out, or someone who's been avoiding investing altogether, I’m here to help you make sense of it and feel confident to start your investing journey. Let’s go!

STAGE 1: Precontemplate or positive procrastination

The first stage is to precontemplate or, as I call it, positively procrastinate. You’re probably already familiar with this one. You’re sitting on your super comfortable sofa, watching a video about personal finance and have this fleeting thought that you most definitely should look into investing. The video ends and of course you don’t jump right off your sofa and start investing, you hit play on another video instead. And that’s fine. Because every single goal or change in your life starts in exactly the same way: you’re getting ready to get ready. We’re in what’s called about change mode only 20% of the time. But that initial thought is crucial. It’s like the seed was planted.

Once I was surfing the internet and stumbled on an online magazine called Blanket. I loved how it was designed and the editor mentioned she completed a graphic design boot camp at Shillington College. I thought: hmm, a graphic design bootcamp, that sounds great! What’s that Shillington College about? I googled it and decided that the course was great but expensive and so I dropped it. You know: one day! Eight years later I completed that bootcamp and started my now a decade long work as a designer.

Yes, it took me eight years of positive procrastination. I knew I’d do it one day, I just wasn’t sure when. The good news is: investing is much much more affordable than my bootcamp course. And become the barrier to entry is so low, nowadays you can shrink your precontemplation stage proportionally and quickly move to the next step.

STAGE 2: Examine your finances

This is when you say hello to Socrates’ “Know Thyself and take a long hard look at yourself and your finances. There are two questions that you need to ask yourself at this stage:

One: do I have an emergency fund?

And two: how much time do I have for investing?

If you said yes to the first question, great! If you said no, you need to save up enough money to cover your essential expenses for three to six months. You might be wondering if you can skip this step… sure you can but you don’t want to. Your emergency fund is the comfy pillow you lay your head on every night. Remove it and you wake up with a headache or not get any sleep at all. Imagine you start investing without an emergency fund and you lose your job, your car breaks down or you chip your tooth on a walnut - that last one happened to me once. You don’t want to imagine that one actually. This kind of stuff happens and the next thing you do is either look for a loan or sell your investments early. It’s the last thing you wanna do! You’ll be robbing your future self that way and lose money that you worked so hard to accumulate. The stock market is volatile. You invest 500 dollars today and you can check your account next week at it will be worth 300 dollars. That’s just the way it is. The long-term trend is upwards but the short term movements can be pretty changeable. That’s why you don’t want to invest any money that you won’t need for the next 10 years. And that includes your emergency fund which you might need if, you know… life happens!

Let’s move to question number 2. You might be super excited and curious about investing and decide to allocate a lot of time for it. In that case, you will research companies, read annual reports and crunch the numbers to pick individual stocks to invest in. It’s definitely a skill with a steep learning curve but if you put the effort in and pick your stocks well you can expect to make higher returns - 20%, 30%, 40%, 100%, the potential is limitless. But the chances are that, like the vast majority of people, you don’t have time for another activity in your life and simply want to invest your money for the future. The easiest and least time-consuming way to do so is to buy some good low-cost passive index funds or ETFs and put it all on auto pilot. Set it and forget it. You can expect to make anywhere between 7 and 10% annual return investing that way. But even when THAT is far too much effort, your final option is to go with a robo-advisor approach and let an algorithm choose your investments. That way your time investment is even smaller.

The most important part of this stage is to be honest with yourself. About your emergency fund savings and the time for the style and rhythm of investing that will fit your lifestyle.

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STAGE 3: Nurture to success

And now you arrive at stage 3 - nurture to success. This is where you’re setting yourself for success by taking care of the necessary prep work. Imagine you’re about to give a dinner party. You will need to make some decisions before you start cooking. And the first and by far the most important decision is the one about deadlines. When is the party happening? How much time do you have to do the shopping? How much time for the starter, the main and the dessert?

It’s exactly like that at this stage of The Pentagon Method. This is the moment you say: right, by the end of next week I’ll have made my first investment. You put it in the calendar. Very important! You make an appointment with yourself and schedule it. Just like you’d schedule your dinner party. Once you have that appointment, that deadline in mind, you do the following:

• make a final decision how much and what you want to invest in. Index funds? Which fund do you want to buy next week? Give yourself about 1 hour for research.

• make a decision about which investing platform you’re going to use. Invest Engine, Vanguard, Trading 212 - I use them all and can easily recommend them. Check them out. You can find my referral links that will start you off with some bonus money in the description of this video.

• and finally, make sure that you use a tax-free account like Roth IRA, Stocks and Shares ISA, TFSA… depending on where you live.

When I wanted to start investing, I gave my then partner some money and a permission to invest it. Only years later, when we broke up, did I discover that my money was stuck in a general investment account, without any tax efficiency, some of it invested in individual shares, some lying dormant and being eaten away by inflation. Now I know that it takes about 3 hours of prep work to avoid a similar situation. One hour to research one fund I want to buy. One hour to work out how tax efficient accounts work. And one hour to look into investment platforms. And when I say one hour each, I give it A LOT of leeway. Usually it takes much less time than that. It couldn’t be more simple so don’t overcomplicate it! You’re not proposing or accepting a marriage offer, you’re not deciding whether to have kids. All you’re doing is going shopping for a financial instrument - doesn’t it sound great? Schedule your action time, do the prep work - that’s how you’re nurturing yourself to success in investing.

STAGE 4: Take Action

The next stage is the most dreaded step but when you look at the previous three stages… once you’ve completed them, this one is nothing more than keeping that appointment with yourself and buying your first investment. You’ve done all the prep work, you’ve made all the necessary decisions and you slept on it. You’re ready to take action.

And this is when you say: but that’s the problem! I can’t seem to take action! I don’t keep appointments with myself. I get you. That’s why people work with me as a money coach! You can book a strategy call with me and that way keep your appointment - all the details are on my website and the link is in the description of this video.

Start small, you don’t need to scare yourself off with putting your lifetime savings into the stock market at one go. And if possible - automate. Decide how much you want to contribute each month into your investments and set a direct debit from your checking or current account. That number needs to be high enough to please your future self but also small enough to keep your present self happy.

STAGE 5: Assure consistency

And so you’ve reached the final stage of the Pentagon Method! Many beginner investors skip this step and then end up in a situation like this one (screenshot of the comment of guy who sold all). If you invest for two years and cannot stomach seeing your investments going down without selling, you didn’t assure consistency of your investments. You want to be thinking long-term - minimum a decade but often closer to a quarter of a century. What’s two years?

To assure consistency means to become an investing genius.

“A good definition of an investing genius is the man or woman who can do the average thing when all those around are going crazy.” Morgan Housel

You will hear a lot of noise about the markets, economy, outlooks and what not and your goal is to not react to it. Every time I meditate with my favourite meditation teacher - Stephen Proctor from Australia - he says in his guided meditations: notice the sounds around you, hear them but not listen to them. In fact, let me play you Stephen. He has a very calming voice. Here you go: (play Stephen). Meditating makes you a better investor.

The point is to hope for the best, prepare for the worst and stay the course. So… you hear the noise but you don’t listen to it. Recession? You keep investing. Market at its highest? You keep investing. We think of ourselves as rational and smart but in fact we’re anything but. Who was it that said that you’re just a monkey with a plan? Naval? I think it was Naval. It’s important to have that plan at least and avoid trying to time and outsmart the market. Just keep on going.

And that is it. That is my Pentagon Method, the five-step strategy for investing for ultimate beginners.