“I don’t want to invest because I would obsess over it and be insecure that I don’t know enough of the underlying and the weird investing lingo that is meant to confuse everyone.”
“Learning about investing is something I’ve been threatening to do for years now, but it seems like such a daunting thing to get into.”
“I don’t know how to get started. I have long term retirement stuff but I don’t even know what I have.”
These are some of the comments from my 1,000 True Fans. And I keep hearing this theme from you.
The US stock market has been the greatest wealth generator in modern history, with over 10% returns year after year. If you have invested in your love companies over the past decade, you would likely have doubled, tripled, or even quadrupled your money. But you either didn’t invest at all or have only been using index funds, thus leaving a lot of money on the table.
You know what? I don’t blame you!
I felt exactly the same way before I developed Love Investing. I knew Amazon, Apple and Google were great companies long before I finally bought their stocks, all because I was scared and confused about investing as a whole.
Then, one day I figured out why I felt this way which kept me from investing.
Guess what, it was by design.
Let’s meet Winston, the financial advisor
Back in 2014, my business had finally taken off. We generated enough income that my well-intentioned accountant introduced me to a financial advisor. She wanted to make sure I knew what I was doing with my money.
What she didn’t know was that I got serious about stock investing in 2010. Although my portfolio beat the S&P 500 for four straight years, I was eager to meet this “money expert.” Because at the back of my mind, I still feared that I didn’t know what I was doing. Maybe I just got lucky for a few years. Now it was time for me to meet a real pro who managed real money for a living. I was sure he could do better than me, or at least would have something for me to learn.
When I met the guy – let’s call him Winston – he had a nice smile, a firm handshake, and a booming radio voice. He said he had read my blog about Rejection Therapy, and really liked my “personality.” He told me a story about him once having wanted to be a TV broadcaster, but decided on the path to becoming a financial advisor instead.
“All good,” I thought to myself. “Let’s see what expert secret he has about money”.
“So, what’s your investment philosophy?” I asked him.
“Buy low, sell high!” he answered with confidence. He followed up with a smile and a stare as if he had just revealed the real identity of the person who killed JFK, and was expecting me to give a wide-eyed wow.
“Oookay,” I muttered, expecting more.
“Look,” he explained, finally figuring that I wasn’t convinced. “The real secret about investing is to be a contrarian. Just when everyone is afraid and the market is tanking, I get in. But when everyone is enthusiastic about it and it’s soaring, I get out.”
“Interesting…” I nodded. “How do you execute that?”
“For example, Russia just invaded Ukraine and annexed Crimea, and the West is imposing sanctions on Russia. The market is overreacting and the Russian stocks are getting crushed. Russia is a strong country and has the oil that everyone needs. Its economy will bounce back in no time. This is a great time to get in on Russian stocks. If you let me manage your money, I will look for buying opportunities like this all the time.”
“Interesting!” I repeated my last response. “OK, can I see your performance chart for the past five years?” I asked because I literally tracked my investment week-to-week. I wanted to see if he’s beating me with this strategy, which sounded pretty risky.
“Umm… sure.” He was surprised by my question. “Well, I will take a look… I have a bunch of accounts… Also I invest a little differently for my clients than myself… I can send you something later.”
Once he started to ramble and dodge, it took all the wind out of his sail. The conversation ended soon after that.
“I really like your personality. I hope to have you as a client.” He gave a last-ditch pitch while shaking my hands.
No, he never sent me his performance chart. And we never talked again. A few years later, my accountant, who initially introduced me to Winston, lamented that she let Winston manage her money. The Russian stock Winston invested on her behalf slid an additional 40% over the next two years. She eventually fired him and took a $250,000 loss while paying his service fees for those years.
Now let’s meet the entire financial services industry
Over the years, I have heard a lot of pitches by financial advisors, although they come in different styles and flavors. There were contrarians market-timers like Winston; There were “quant people” who threw a hundred different numbers and metrics at me saying they can outsmart everyone; There were people who just wanted me to invest in index funds because “you can’t beat the market”, but inevitably wanted me to buy the insurance products they were selling.
The list goes on and on, but no matter who they are, there are three constants:
- They wanted me to understand that investing is not for a mortal like me. It is too complicated, too risky or too dangerous. A regular person who dares to invest would lose everything at any moment. I should just focus on making money, not investing it.
- They wanted me to hand my money over to them, the professional who knows what they were doing. No worries, they are smart, have finance degrees and credentials. They will take care of the little guys like me.
- The end results they want to achieve is either selling me a product for commission or services for a fee.
Now, this article is not about me railing against financial advisors. I have many friends who do this job, and they are good people. However, the whole industry they represent – the financial services industry, is only viable if they make money off you. A lot of money.
I don’t know if you have watched The Wolf of Wall Street, a movie filled with memorable scenes depicting the ridiculousness of the financial services industry. Out of all the scenes, the one below has always stuck in my mind, because it is the most accurate depiction of what’s going on.
Why the financial services industry wants to keep you scared and confused
Now you know that the financial services industry has to make money off you to stay viable, you will also understand why you haven’t been investing over the years. The industry has lied to you repeatedly to create a shroud of mystery around money, so you aren’t investing it in the companies you love. The more confused, scared, and bored about investing, the more likely you will have to rely on them.
When you feel inadequate about investing, what do you do with your money?
- Leave it in a bank account – benefiting the banks
- Find a “money expert” like Winston to manage your money – benefiting the financial advisors
- Buy mutual fund or index fund – benefiting the fund managers
Guess who represents the pillars of the financial services industry? That’s right: the banks, the financial advisors and the fund managers.
Who has bought the Wall Street bankers’ and fund managers’ Ferrari? You! Who has paid your financial advisor’s mortgage? You! And who has made “money experts” like Dave Ramsey, Suze Orman and Jim Cramer wealthy media stars? Also you! In fact, the entire financial services industry depends on your feeling of inadequacy.
Yet, while all these “money experts” are getting rich, you stay poor and confused about money. What are you getting with their “financial advice and services?” Have you gotten a lot of returns? Truth be told, 89% of money managers consistently underperform the stock market over the long term. In fact, investing is the only discipline that the amateurs can, and often do beat the pros. You would be better off if you just invest in an index fund. And you would be much, much better off if you were a Love Investor.
This is why I am starting the Love Investor blog.
The real answer to your financial freedom lies in you and your love, not the ideas, advices and services of “money experts.” When you understand your investment, and achieve harmony between you and your money, you don’t need these experts anymore. Your investments will no longer be cold, soulless numbers that have to be manipulated and maintained by someone else, but happy, meaningful ownerships of awesome companies by you.
The next time a “money expert” approaches you wanting your money, tell him you are Love Investor. He will soon start huffing and puffing about why it’s a bad idea to invest on your own. You can then show him your love chart. He’s gonna be incredulous and ask you how you are doing it. You can tell him Jia sends his regards.