I’ve had this conversation a few times in the past month, so I figured I’d write a quick post on my thoughts on investing. I’m using the term investing loosely, but I’m specifically referring to exerting energy or financial resources with the hope of achieving some type of positive return later in life. This post will mostly be a brain-dump of thoughts.
Number #1 Rule
Invest in yourself. Any investment I make is primarily a result of my desire to learn something. There must be a learning objective. Here’s a few examples to illustrate:
- Buying a condo – learn how real estate investing works. Learn how to renovate and/or fix things. Test theories around what areas may appreciate in value.
- Lending Club – Learn how peer to peer lending works.
- Stocks – Learn how to value a company. Test theories around growth industries/companies.
- A few stocks I’ve picked (TSLA, FB, BOX, TEAM)
Number #2 Rule
The further you abstract yourself away from making decisions about your investments, the less you learn, and the more risky it is. I get that a financial advisor is smarter than I am regarding finances, however, what happens if they lose a ton of your hard-earned money? You blame them.
Would you rather lose $5,000 as a result of your own decision, or someone else’s? If I lose it, I can only blame myself, and I learn from my mistakes. If someone else loses my money, I learn very little.
Here’s another example. Let’s say I have $50k to invest. I could either invest it in the stock/bond market, or I could buy a piece of real estate. If I invest in the market, I’m constrained to a few major decisions 1.) what firm invests the money 2.) what’s the portfolio composition?
Now compare that to real estate. I can 1.) choose the location to invest 2.) pick the building to invest in 3.) choose where I get a mortgage, 4) choose how much to invest in improvements, etc. With each decision there’s an opportunity to learn. If you abstract yourself away from most of the decisions, you save time, but learn very little.
Side note: it seems crazy to me that a “good” investment strategy revolves around handing someone else your money, and regardless of how well they perform, they still make the same amount (referring to management fees).
No Brainer Investing
If I see a book and I think it looks remotely interesting, I buy it. If I spend $10 for a book and learn one thing, it pays itself off. Books are compressed knowledge/life experiences. Why learn from my own mistakes when I can learn from someone else’s?
I’m plan on working until the day I die. I highly doubt social security will exist in forty years (as it’s on the road to insolvency in the next ten years or so). I see work as a way to exercise my brain. Therefore, I do not plan on saving for retirement in a traditional sense.
When I say traditional, I mean maxing out 401ks, etc. Essentially stashing a percentage of your earnings away for decades, with the goal of no longer working, and supporting yourself off the savings accumulated.