Picking a Lane
Ernie Neve, CPA
May 25, 2022
As you can probably imagine, I get asked ALL the time about investments, especially from folks like you. They might have a 401(k), or even a pension, but they’re smart enough to know those won’t be enough.
“Should I invest in crypto?”
“What about real estate?”
“Bonds in India?” (Seriously, I hear it all!)
I’m not exactly sure where you are on your journey, but there’s some value in the advice I want to share this morning…
Go all in on something, not everything.
Think about it: every market is not going to go up at the same time or rates, so if you choose to “diversify” (more on that later…), you’re accepting – and implicitly stating – you’ll be okay losing most of the time.
Here’s what I mean: if stocks go down, cryptocurrency and precious metals tend to react in an upward trend, at least in the short run. If oil rallies, other investment groups stumble.
Real estate usually runs in a much longer cycle – roughly 15-20 years – but it is still cyclical.
When it comes to the person, though, they have a finite amount of cash they can invest every year. Maybe it’s a million, maybe it’s a thousand, but it’s only so much. When you’re in the phase of wealth building where you require solid returns, though, diversifying means you’re intentionally going to accept some of the investments you made aren’t going to pay well, or even worse, they’ll lose money.
So stop doing that…
Instead, I want you to pick the strategy … whatever it is, and go all-in on it. Learn how your company 401(k) works, dig in to the mutual funds they offer and learn how the whole process works.
Don’t just trust your money to some faceless entity you’re hoping will make your retirement pleasant.
Learn the craft and take an active role in your investments.
Now let’s talk about this “diversification” stuff. Yes, I’m well aware that no more astute investor than Warren Buffett has suggested diversifying one’s investments, but when you take his comments in the context they have always been made?
He’s talking to those with real wealth. The multi-millionaires, the billionaires, the corporate raiders, the hedge-fund operators, the trust fund babies.
He’s not talking about 23 year old Scott in Sioux City, working two jobs, trying to save some money and learn what his new 401(k) plan lets him do.
Scott doesn’t need diversification; he needs to learn what investment actually means … and then, he needs to take action as an educated young investor.
If you’re ready to acknowledge that there might be more “Scott” in your investment strategy than there is Warren Buffett, let’s have a call to talk about a few things. Chances are, you’re not nearly as far off the trail as you think, and you might be truly surprised at how much you can save and the returns you can realize with just a few tweaks.