My brother has a knack for making and saving money. At just 28 years old, he’s managed to build up a sizable net worth. With his current pace, I suspect he can probably be financially independent by his mid-30s.
What makes his net worth growth really astounding is that it pretty much happened by accident. While he’s always been good at making and saving money, my brother has never been so good at actually knowing what to do with that money. For a long time, he put his money in a regular savings account. When he finally did start investing, his strategy was to walk into a random financial institution, give his money to some financial guy, and ask him to invest it for him. As you can probably guess, that money didn’t end up in the best spots. The financial guy invested his money into expensive, actively traded mutual funds which really didn’t make much sense.
Over the past few years, I’ve worked on educating my brother about the fundamentals of investing. Buy and hold. Time in the market. Keep costs low. These are all investing fundamentals that will get him to where he needs to be. He’s now put his investments in a much better place than they were a few years ago.
But every once in a while, my brother will ask me a question about some hot new stock or the latest cryptocurrency or about some other weird investment that he heard about from a friend. I think there’s a reason that these types of out-of-the-ordinary investments appeal to him. My brother actually has a lot of people around him that have hit it big investing in ways I don’t recommend. I like to think of it as “fancy investing” – basically, investing in stuff that is out of the mainstream or investing in extremely risky ways.
One friend of his turned a few hundred thousand dollars into over a million dollars by putting it all into Facebook stock many years ago. Another friend of his is sitting pretty in a million-dollar house that his mom gave him and is now living off the money he made from investing in individual stocks. He has other friends with big positions in cryptocurrencies as well.
Every time my brother brings up some new hot stock or a weird new investment vehicle, I remind him that investing doesn’t have to be fancy. There’s a temptation to keep up with the Joneses in many aspects of our lives. And when it comes to investing, there’s a temptation to keep up with the Joneses there as well.
But as I keep telling him – the great thing about investing is that you don’t have to keep up with the Joneses. You can ignore the people around you and go at your own pace instead.
When It Comes To Investing, Ignore The Joneses
It’s hard to avoid the appeal of fancy investing when you’re surrounded by so many investing success stories. Do any Google search and you’ll find hundreds of articles about people that have made it big investing in the latest meme stock or cryptocurrency. Some people have become millionaires overnight by investing in something weird.
That’s not to say that betting it all on one thing is inherently wrong. Most people who make it really big have done so by betting big on one thing. Starting a business, getting an education – these are all big bets you’re making on yourself. But these bets are a little bit different. You have more control of them compared to betting on a random stock or cryptocurrency.
I often remind people that a lot of the success stories they see come from people in a completely different financial position than they might be. For example, my brother’s friend who made over a million dollars investing in Facebook stock is living a very comfortable life now. But when you dig deeper, it turns out he didn’t have anything to worry about at all. His incredibly wealthy parents gave him the money to do whatever he wanted with. We know about his success, but if he had failed, it wouldn’t have even mattered to him.
When you see success like this, investing in passively managed index funds seems so boring. Not everyone has to earn the money that they invested though. When it’s your money, you need to make sure you invest it correctly.
Stick To The Fundamentals – It’ll Get You Where You Need To Go
My brother is already leagues ahead of most people his age. Keeping his investments boring will be enough for him to get to the promised land. He doesn’t need a 10x stock or a big return on a cryptocurrency to make it.
That’s why I’ve been pushing him to stick to the fundamentals – keep things low-cost, invest consistently, and do it for the long term. Putting all of his money into a total stock market index fund, for example, should be enough to get him to where he wants to be.
Investing in crazy things looks cool. It’s easy to see people making tons of money from some weird investment and feel like you’re missing out or are stupid for not doing it too.
But don’t let that knock you off your path. Stick to the fundamentals and let that money grow. You don’t need to keep up with the Joneses. Let them invest in whatever crazy way they want. You and I can stick to our boring old fundamentals.