In the investing sector, there are different groups of investors with different motives. Everyone has an agenda – some are more reckless than others.
In Group #1 are the thrill-seekers. To them, investing is a game, and that game is to outdo someone or something else. Some have a goal to beat the S&P 500. Others want to outsmart Wall Street by beating others to the punch.
It’s a timing game for them – picking up stocks before they rise and dumping them before they slide – profiting from anticipation.
In Group #2, investing is an extension of high school. They want to hang out with the cool kids. They’re the first ones to jump on the latest trends and styles. They’ll try anything. They just want to fit in.
To put another way, they don’t want to be left out and will do whatever the crowd is doing not to be left out of the conversation – no matter the outcome. More often than not, just like in high school, going with the crowd often ends in disaster because the crowd doesn’t invest based on logic; they invest based purely on emotions. In high school, going with the crowd often means doing things you wouldn’t typically do on your own.
In the first two groups, investors invest based on emotions – whether that’s doing what thrills them by trying to outsmart the markets or chasing the next big thing like the cool kids are.
Then there’s Group #3. This group doesn’t have an agenda. They want to take emotion out of their investment decisions, so they play it safe or leave the decisions to financial advisors.
In high school, these kids mostly stayed out of trouble. They went to school, got good grades, and probably had after-school jobs because it was safe, and it’s what their parents’ parents did. This group may end up making good incomes and salaries, but they don’t do anything out of the norm. They just want to make it to retirement safely.
Everyone has a motivation, an agenda, or an end goal when it comes to investing.
A few years back, I realized that for me investing was a means to an end goal. For me, that goal was NOT just to safely reach retirement or even that common lofty dream that others have of one day traveling.
Something was missing with many of the most common investing strategies.
Group #1 and the market timers are about gambling and speculating. That’s no long-term strategy to build on. Neither is going with the herd like the investors in Group #2. Going with the herd has historically resulted in disaster, so that strategy is no good.
I’m very familiar with Group #3 as this group included some of my highly-compensated friends who were married to their jobs and could never seem to get time off to do the things they wanted to do. They didn’t have the time to put thought into investing, so they left it to financial advisors – most of whom couldn’t even beat the S&P 500 – or they stuffed their money in 401(k)s.
My friends didn’t have time to think about investing because they had to work – meet clients, be there for their patients, or bill hours to generate income. They all had the typical jobs most parents wanted us to grow up to be – engineer, doctor, attorney, and CPA – and they were all headed to that golden age 65 retirement like everyone else.
But as I studied the lives of these friends closer, I quickly realized that despite all their education, high incomes, and big houses, they lacked the one thing that to me trumped everything else.
They were missing the freedom to do what they wanted and how, when, and were on their terms and not on the terms of the corporations, hospitals, or law firms they worked for.
That was my life-changing moment. I realized that I had different goals than any of the three groups I described above.
I wasn’t investing to retire safely and to travel when I reached that golden age.
I certainly wasn’t investing to “beat the market.”
Never one to follow the herd, I wasn’t investing to chase the next big thing.
I was investing for Freedom – True Freedom.
- Freedom to travel – NOW. Not when I’m 65.
- Freedom to explore and start multiple businesses now.
- Freedom to take my wife out for breakfast, lunch and dinner during the week.
- Freedom from being tied to an office or to the clock.
- Freedom from the pressures of the crowds.
- Freedom from the pressure to make up losses from bad investment timing.
This type of freedom requires investing differently from the crowd. It requires thinking long-term. It requires investing in assets that give back.