Having been in and around the investment world as both an investor and an advisor, the most common thing I hear from individuals is how they lost money at some point in their life. They either gave an advisor their money to manage, or attempted to do it themselves, but the results were the same. This generally leads to the questions… “What’s wrong with how I am investing?”, and “Can you help me fix what is wrong?” I hate to say it, but what is wrong has nothing to do with the investment, or the process of how they are investing. It has everything to do with the fact they are not investing based on themselves: their focus, passions, goals, objectives, or dare I say their psychological profile.
I happened to be watching Dr. Phil a while back and to my surprise an acquaintance of mine was on the show. Of course, I had to watch and see why. Well, he had a gambling problem, and his wife had requested help from Dr. Phil. After interviews with everyone there they brought him out and interviewed him asking the same questions. The obvious result was that he was in denial about his gambling problem. When Dr. Phil felt he wasn’t making any progress he made a comment out of frustration… “It ain’t gambling the way you’re doing it! You should just stand on the corner and give away twenty-dollar bills.” That comment has popped into my head many times as I speak with investors. I want so badly to say, “It ain’t investing the way you’re doing it….” I’m not sure if Dr. Phil ever got through to this person, but he did attempt to help him and his family. Regardless, he helped me understand that sometimes we are too blind to see the bases of our mistakes. In order to cure a problem you first have to admit you have a problem, and then decide if you are willing to do what it takes to rectify the problem. Investing is no different.
If your investing is not about you, your goals, your dreams, your life… you will face plenty of challenges going forward. Let’s face it, investing is challenging enough without adding to the frustration. Let me state this as clearly as I can… Investing is about you, not money! When you make it about money the anxiety level rises. When the anxiety level rises your fear steps in and with fear comes poor decision- making. It is like an avalanche… it picks up steam as it moves down the hill. Invest on purpose… your purpose. Not the advice of someone else, not the media, a newsletter, CNBC, or your advisor. All of these sources can help guide you once you know what your purpose is. Think about what experience you want to achieve from your money.
If we make investing about ourselves versus money it takes on a completely different perspective. Now, we can invest on purpose. The purpose is what we want. Make a list. Some call it a bucket list, but I prefer to make a list of what I want to experience in life and from life. Now I am investing for experiences not ROI (return on investment). ROI is a factor of the experiences we create in our lives. Those experiences are different for everyone. That is why investing is based on what you want and what you want to accomplish. The most financially successful people in the world came from doing what they love and following their passions in life… not investing. Investing your money in your passion is where true wealth is created. The examples are everywhere if we stop and look. Bill Gates, Warren Buffet, Ronald Reagan, Micheal Dell, Ghandi, Andrew Carnegie and the list goes on in every walk of life. Do what you love and the money will follow.
I remember one of my advisory clients, who retired at the grand old age of 65, told me what he wanted to do based on his list of travels, charities, grandchildren, hobbies, etc. I told him that based on the list he would spend two-thirds of his money over the next 15 years. His reply changed my view forever… “That’s fine because when I’m 80+ I may not or will not be able to do all of these things, but what I will have is the memory of having done them with the people I love.” As an advisor my focus had always been to preserve the principle and spend the income. What this gentleman was teaching me was that investing in life’s experiences was a better investment than having the principle. The amazing thing to me about this client is that he is now 84 years old, and he really has done all of those things and more. He experienced life by investing in what he wanted and not what books and Wall Street tell us to do. Along the way he made investments in things he loved (stocks, real estate, etc.), and he has only eroded his principle by 15% from when he started nearly 20 years ago. I have seen this unfold time and time again. When people invest in the experiences of life, their ROI is compounded in ways that are not measurable in percentage figures or dollars.
Compare the story above with one about another client who retired at the same age of 65. He had more than he needed with his pension from a major company after 35 years of labor, social security, and his wife’s pension from teaching. They had a large sum of money by the standard of many people. He spent the next 21 years of his life worried that he would run out of money and not have enough for healthcare, etc. He wouldn’t travel, and refused to help his grandchildren with college expenses based on his fear of outliving his money. He worried constantly about the return on his investments. He refused to buy investments that weren’t guaranteed, no matter what. When he passed several years ago he still had his money plus some growth. He did pay for healthcare on both he and his wife, but he never experienced things he wanted to experience. His wife never experienced what she dreamed as they both lived in fear of money loss. No compounding effect from experiences, and no real joy from what he worked so hard for all those years. To me that is not investing. That is money imprisonment.
Both of these clients achieved their respective goals… one lived… and one existed. Remember this one simple fact. He who dies with the most money… still dies.
Invest in your life experiences not possessions. Don’t violate your inner soul. Focus on investing for experience, not ROI. Make investing about you and the experiences you want in life, not money. Invest on purpose, invest in yourself, do the things you love and you really will have a rich life with the true ROI being measured in life’s experiences.
Another wise saying from one of my clients many years ago, “You will never see a U-haul behind a hearse.” Funny thing… I never have.