Simple Success Podcast - How Investors Make Money
Once upon a time there was this person and this person called himself an investor.
One day this investor did some thinking, and what he thought was:
“When can I retire”?
Well, he did think like that, but we don’t know if those were his exact words to himself.
What he was really asking was:
“How do I know I can live indefinitely without having income coming from somebody else?”
Because that's really the question that we all have and should have.
So how do we solve that problem?
We make money!
How do we make money?
The way in which most people manifest this is to have a job.
And while that’s understandable, there are flaws with that thinking.
The first being that you're working for somebody else - you're not calling the shots in your life!
That's not a long-term recipe for success for most people, particularly not most listeners to this pod!
If you haven’t found out yet, being your own boss can be awesome!
But back to our investor:
He's thinking to himself:
“How do I make money other than having a job? I already have a job.”
And, speaking from the host’s perspective here, that's important!
But he’s also asking “What if I didn't have a job?”
One realistic answer to that question is to invest,
And that leads to the question that is the topic of this episode which is
How do investors make money?
They make money by investing in Something! Anything!
I'm talking stock, I’m talking bitcoin, I’m talking real estate, I’m talking a lot of different possibilities.
I'm not here promoting “One Right Answer”.
In fact, I believe that all of the answers are the right answer in the proportion that’s right for you and your goals.
So, our investor is thinking:
“How do I make money by investing?”
He’s crystallizing his thinking; he's getting more and more specific
And as you will see, more and more specific is NOT actually more complex.
It is in fact simpler because you’re refining your thinking and not having to divert your brain’s attention to other routes that aren't solving your direct problem.
Now why is that important?
Because none of us have unlimited brain power not even our investor who is asking:
“How do investors make money?”
How they make money is opportunities - they find an opportunity in which they can put money to work.
This is money they already have, however they got it, and if you need help with that, we have our coaching options.
Then they effectively lend it to someone or something for a specific purpose with which they agree.
In return for that they receive back more than they put in.
Let’s say that they put $1000, which they’ll take back out after an agreeable amount of time.
Now, ideally, “agreeable” means both for the investor and for the one receiving the money.
The one receiving the money upfront pays the investor back more than $1000 – maybe 12 or 14 hundred.
The right amount is not our topic here. That’s way more specific. it's determined by what the investor is seeking and what the receiver of money is comfortable with when they come to an agreement. That’s how it works.
That's how investors make money.
You? Same thing. You find a thing that you want to do whether it's real estate or stock or bitcoin or many other things.
You find something that you are comfortable with, that you’re enthusiastic about...to start.
We’ll go uncomfortable soon enough but let’s start out comfortable and easy.
So, our fictional investor is has come around to the idea that it is not only possible but good to make money other ways in addition to having a job.
Put something out in order to get something back. That’s the common thread.
Now how do we get there?
We get there by connecting these ideas to our goals - not other people’s goals - oh no no no no.
Do NOT compare yourself to others along the way.
That's one of the biggest mistakes if not the biggest mistake that investors can make.
Comparing themselves to others.
Yes, we do compare opportunities.
No, we don’t compare ourselves to others.
Here’s another example: we have an opportunity for “Investment A”, which gives us a return and has other important facts about it. Or we could take the opportunity for “Investment B” which has a different return and different other important facts.
We take the one which makes us happiest, which makes us the most comfortable, and which gets us to our goals. You don’t have to feel pressured to invest in someone else’s so-called “right way”, as long as you understand and accept the tradeoffs which might be there.
So, yes, we compare investments but no we don't compare ourselves to others.
For example, if I got 15% this year, which is way better than anyone should really expect, I feel good.
But then, I go out and I talk to my neighbor and my neighbor says “Oh! Well! I got 16%!”
This is a trap.
Don’t fall into that trap.
Find out what's right for you - what you want - and stick to that.
So, we're comparing opportunities.
How we make those opportunities?
The first one is, and I’m going to be very transparent here and say that these ideas really are:
How I Make Money and How You Should Make Money
So, with that disclaimed, here we go!
Be the Boss
I will never forget one time when I had my own financial advising office, and I was in charge of that office.
I went to outfit that place with some nice things that fit my environment.
One of those things was at a store that I went where the clerk asked me
“Does the boss let you do that?” to which I immediately responded
“I AM the boss.”
Think about that: since you are the one in charge of every aspect of your life, you are the one who is going to win!
We are here to apply that to investing, and this is one of the ways you can do that!
The second thing:
The second thing to remember is to have at least one MSI.
What are MSI's?
MSI is an acronym which means Multiple Sources of Income. Some people say Multiple Streams of Income.
Both are good - they mean the same thing.
It's having a source of income other than what most people consider their primary income which as I said before is often their job.
Having multiple sources of income means, among other things that if one source of income has a bad time of it - say as in now, in this pandemic where people have lost their jobs and therefore could no longer rely on that source of income.
Landlords have not been getting paid rent. That’s not even close to being a complete list of side effects we know about, and many others that we don’t even know about yet.
This is a problem, to be sure, but it is FAR LESS of a problem when our dependence on it is also FAR LESS. When we have 2, or 5 or eventually 10 or more MSIs, the critical importance of any one of them is a lot less.
That reduces worry.
That’s the way it should be.
We also reduce worry with the third step, which is:
You will not get this advice from anyone who is actively receiving their only or at least their most important source of income from the financial industry.
To be fair, they have a goal like anyone else, and in their case it’s getting people to use their product, so that they in turn have a job, make money, care for their family and community, and, well, fill in the blank with your own motivations.
Using their product though means as we say in the biz, “making trades”, and making trades can include not being patient.
Warren Buffett has famously recommended buying and forgetting that you bought. This idea shares some of that philosophy.
Even though buying and holding is sometimes derided as Holding On For Dear Life, which has even been shorted to the acronym “H.O.D.L” pronounced “Hoddle”, it’s also patient. Excitement is a good thing, don’t get me wrong. I don’t recommend getting it here, however. ;)
Bottom Line: Everybody's choices are individual to what they want.
It takes time to find those things out.
You have to be patient while you try those things.
Don’t put all your eggs in that basket as the saying goes, but don’t do the opposite either, is what my saying is.
See how it feels and then slowly and surely expand. But start small.
Start A Small Habit
Do a little bit every week.
This is what I do.
I decided on a dollar figure that I wanted to invest in various assets. Some stocks, some crypto, some real estate etc. etc. etc.
I took that and broke it down into a weekly number - just took the annual number and divided by 52, then rounded to the nearest dollar (since I’m in the US). You, of course, can just make that adjustment in your own country’s denominations.
Then I set it up in various systems like a Calendar system and an online banking system and so forth.
The result is that I automatically invest that weekly number in one asset on week one of the month.
I invest that weekly number again in a different asset on week two of every month.
Same with weeks 3 and 4.
For the occasional week 5, which occurs only about 4 or 5 times a year, I put that same number into an investment in which I have slightly lower confidence.
But I still do it, and that’s the point.
I start small and I build my confidence, just like you will.
We’re changing the way we look at things, and
Remember, “THAT’S GOOD”.
Also remember, this is Financial Life Coaching from A Happiness Perspective! Coaching Happiness.
Just as many, many writers have told the story of the benefits of a positive attitude, I’m saying the same thing. I’m also helping you connect that mindset to successful investing.
And just like magic, I turn the question around, this time into a statement.
“How Do Investors Make Money?” becomes “This Is How You And I Make Money!”
It’s flipping the script.
Anyway, to wrap up the story:
How Investors Make Money
We put ourselves at the center of our results, we ensure our results include MSIs, we’re patient, we’re small and we’re persistent.