Happy December, Self-Directed Investor Nation! Today we touch on the DANGER of creativity… the need for a clear investment plan… a famous dinner party attended by Bill Gates and Warren Buffett… and even some blasting of, or maybe praise for Bitcoin… all culminating in the single most important factor for your success and I, Bryan Ellis, your humble host for today’s ascent into investment excellence, will share it all with you right now in Episode #289 of Self-Directed Investor Talk!
Hello, Self-Directed Investor Nation! Welcome to the broadcast of record for savvy self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.
My friends, it’s a great time to be alive. The economy is booming, there’s more optimism from the “average Joe” right now than has existed in a very long time, and possibly just as great, you and I are self-directed investors which means that we have our pick of practically any asset type out there that we want… be it the blandest bank CD, the latest cryptocurrency or anything else… it’s all on the table for me and you.
And that near absolute freedom may also be the biggest risk of being a “liberated” alternative asset investor. What do I mean? Well I’m glad you asked!
And by the way, if you’d like to participate in this discussion, you can do so by telephone toll-free at (833) SDI-TALK, by email at [email protected], or on today’s show page for episode #289, which is of course, SDITalk.com/289.
There’s a book called Snowball: Warren Buffett and the Business of Life by Alice Schroeder which recounts an interesting story. A dinner party was hosted by one Mary Gates. Mrs. Gates is an accomplished professional in her own right, but probably most famous for having a son named Bill who founded what is arguably the most important software company in the history of the world, Microsoft.
This is an illustrious dinner party, attended both by Mrs. Gates’ uber-wealthy son and by none other than the Oracle of Omaha, the one some describe as the greatest investor of all times, and the boss of Berkshire Hathway, Warren Buffett.
Now according to this book Snowball, Mrs. Gates asked everyone at the table to identify their singular most important factor to their success, both Gates and Buffett answered identically and with a single word:
Focus. Think about that. It’s both a concept and an action – a state of mind and an ongoing choice. And according to Gates and Buffett, it’s the top factor for success.
How does this relate to you and me as self-directed investors?
It’s pretty simple, really: Focus is the opposite of distraction. And in the investing world, distraction is in huge supply.
An example is in order.
Let’s take Bitcoin, for example. Bitcoin has been going crazy lately, both in terms of its upward trajectory and in terms of it’s coverage in the news and social media. It’s astounding to me how many “bitcoin experts” we suddenly have… most of whom I bet have not even been in the cryptocurrency game for a full year at this point.
We’re not going to debate the veracity of Bitcoin as an investment, because that’s really not the point. The point is: Does your investment plan have a strategy for dealing with things like that?
Look, it’s extremely, almost mind-blowingly rare for any particular asset to jet upwards in a hockey stick fashion. But to have SOME asset somewhere that’s shooting upwards like that is quite common, and the Dutch Tulip craze isn’t the last time it happened… and it doesn’t always work out badly.
Just look at the group of stocks called FANG – Facebook, Apple, Netflix and Google. The upward trajectory of those stocks has been astounding, and is likely to hold. And even those pale in comparison to the massive run-up in the stock of Texas instruments that culminated in March 2003, a run from under a dollar to about $100 per share. But that one crashed hard and has only this year – over 14 years later – recaptured it’s previous valuations.
So here’s my point: These amazing blasts upwards have happened many times in the past, and will happen, without a doubt, many times in the future.
So how does your investment plan deal with these opportunities, which always promise huge returns, but always carry risk that’s as grand as the promise?
If you think about it honestly, having such a plan for the inevitable “latest greatest investment” is the essence of focus. At it’s core, focus is just the selection of an objective and the elimination of everything that doesn’t support that objective.
I love Bitcoin as an example as an example of both a huge distraction and a huge opportunity, because nobody really knows – including me – if it will turn out to be a real world-changer or just another crazy fad. Could go either way. But if you don’t have a clear plan for how to handle the types of blips on the radar… the fleeting opportunities like Bitcoin… you’re going to be stuck in a very bad spot the next time such an opportunity arises.
What is that bad spot? Creativity.
Yes, I know you think creativity is a good thing, and it is. But it’s a good thing when you can think with a clear head, dispassionately, and without immediate pressure to decide. But when that’s not the case – when you do the military equivalent of entering into a battle without either a clear objective or a clear battle plan – then in that circumstance, creativity is your worst enemy.
You should never, ever make fundamental policy or planning decisions in the heat of the moment unless you absolutely must. And in the context of making investments, the word “must” is almost never a factor.
And if part of your investment plan doesn’t address these rocketship types of opportunities – whether to dismiss them entirely or whether to entertain them under your specific criteria – then in the heat of the battle to build your retirement, right when fortunes could be won or lost, the decisions you’ll make will be emotional, short term, and likely short-sighted.
And at the end of the day, those things – emotionalism and short-sightedness – are the product of a lack of focus. Focus, my friends, is the beautiful offspring of planning and discipline. Do those words describe your investment plan? I hope so. As we enter the final month of 2017, it’s a great time to think this through for yourself and your family.
My friends, invest wisely today, and live well forever.
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