In today’s episode, I want to have a philosophical discussion about why some investors succeed while others get mediocre results despite having similar circumstances, education, and income.
I will also discuss why I see it happening and give you some takeaways you can think about when examining your own approach to investing.
I was listening to a story about a very successful venture capitalist with a fantastic track record of making consistent decisions over time and, as a result, had an extremely profitable fund.
One of the things that struck me was the expectation of a venture capitalist like this guy who throws millions of dollars at startups.
Out of all the startups, they expect about 50% to fail and lose all their money completely. Another 30-35% will be mediocre in doubling the money. Only 5-15% of startups will be successful and make ten times the capital invested.
When you think about investing from that perspective, you might think that the odds are terrible and the chances of success are very low.
Yet many high-net-worth individuals would look at venture capital as the way to take their wealth to the stratosphere.
For every success story, plenty more people have lost significant amounts of money, whether it’s an issue with the founder, an issue with the economy, or just a poorly executed idea that can result in millions of dollars of loss.
This made me think about how we, as ordinary investors, take some of the lessons and thinking and apply them to our own situations.
I want to start this philosophical viewpoint by discussing what I think people believe about investing first.
This is based on what people have told me, what I hear in everyday conversation, and what I have witnessed over the last 25-plus years.
Misconception #1: Some People Are Born With Midas Touch
The first thing people believe is that some people are just born with a Midas touch.
It means that they’re born with this ability to identify the winners from the losers and that everything they touch turns to gold.
I have a friend who is someone who many people think has the Midas touch.
He has had a fantastic career in multiple businesses and has been an extremely successful developer.
My feeling about this guy is that he is astute, he’s intelligent, but he’s also as prone to error as everybody else.
He, more than anyone, would talk about things being uncertain, so you should stack the odds in your favour.
Misconception #2: Wealth-building Is Smooth and Easy
The second thing that I would say people believe about investing is that wealth building is smooth and easy.
Many people believe that when you start investing in particular deals, you will compound those results, which will be a nice, straight line towards your ultimate goal. But that is not the case.
The other thing I’ve heard regularly is that there are no losses or setbacks.
That’s not true because, in my own experience, I’ve had some significant seismic setbacks and losses in my time.
Misconception #3: Money And Happiness Are Correlated
Then the other thing I think people believe about investing is that money and happiness are highly correlated.
I’m talking about the idea that happiness will automatically arrive when you hit a certain money goal and financial problems disappear.
Now, let me focus on the truth that I believe that not many people tell you or that isn’t talked about in wider circles,
I first want to say that investing is more of a mind game than anything else.
I’ve often said that the results you have are a function of how you think and the actions you take.
If I were to make the analogy to weight loss or getting fit, many athletes would say that you have to train hard.
But if you’re trying to get in shape, for example, there’s a consensus amongst people who are smoking hot that it’s more about what you eat than throwing yourself at more training.
That is also the case with investing.
Your relationship with money, how you think about money, how you recover from loss, and how you recover from mistakes greatly impacts your ability to move towards your financial goals.
There’s No Such Thing As The Midas Touch
The second thing I would say is that there’s no such thing as the Midas touch.
Some people may have an affinity for making great decisions, but people always fall from grace.
I’ve read countless stories and witnessed through clients, family, and friends that people have the Midas touch until they don’t.
I’ve known many people living high on the hog and living the high life. Then suddenly, something fairly fundamental goes wrong, and they are left in a financial situation that diminishes from where they were.
It’s important to recognise that this idea that things can’t go wrong is not a healthy perspective.
The example that comes to mind is Elon Musk. I’ve heard it said several times that he has the Midas touch and that everything he invests in will be a success through sheer grit and determination.
He is an extreme character and an intelligent person who stacks the odds in his favour.
But is it possible for him to be involved in a business that fails? I would say it’s possible,
It doesn’t mean it’s going to happen. But to say that it could never happen is also naive.
This Midas Touch idea needs to be approached with caution.
Not Everything Will Go According To Your Plan
The truth that nobody tells you is that all investments will hit speed humps and can derail.
This is particularly true when we’re talking about active strategies in real estate, like developments, renovations, flipping, and others.
People sitting on the outside might think everything is running smoothly and going according to plan.
If you had any involvement with developments, you would know that their course rarely runs smoothly.
There are times when people don’t turn up on time. I even have developments where builders have gone bankrupt just before completion.
Sometimes the problems are small, and sometimes they’re big.
One of the things I’m doing right now is trying to help my beloved husband participate in some of the development deals more actively.
He’s flabbergasted because I’ve tended to shield him a little and get on with doing things. He’s also stunned at how many things don’t go according to plan.
The truth is that if everything went according to plan and if it was easy, then everyone would be doing it.
When it comes to investing and finance, have this mantra of “it’s just another problem to solve”.
It’s nothing to get flustered or completely spit the dummy over. On the other hand, you’ve got to expect that things will not go according to plan.
Even with passive investing, things can go wrong.
Sometimes the most profitable projects are the most difficult ones.
If you study investing, there are investors who have been wildly successful. But then, in some cases, they’ve been completely wiped out.
The difference between those who come back is that they know what to do to get back on their feet. But, above all, they don’t make the setback mean anything.
Let me share some lessons you can take away from all this.
Lesson #1: You Need To Recognise That There’s A Very Different Skillset For Making Money vs. Investing
First, you need to recognise that there’s a very different skill set for making money versus investing.
I hear people confuse those two things all the time, especially if they’re in business.
I’ve often seen a disconnect between making and keeping money for some successful entrepreneurs with a gift for making money.
That’s why you need to invest time, energy, resources, and bandwidth into growing your skills around investing.
Lesson #2: How Strongly Do You Identify With This Concept of Grit And Determination?
The second thing I would say is to ask yourself the question, “How strongly do I identify with this concept of grit and determination?”
I was pretty slow to learn many things, but many people have pointed out to me over the years that I have quietly exhibited great grit and determination.
Even when I haven’t understood things or got things wrong, I’m pretty good at picking myself up, dusting myself off, and moving on.
Every time you make a mistake or lose, look for the lesson. But don’t do such a detailed post-mortem analysis that you get stuck.
I’ve had moments of feeling slightly stuck, and then I’ve caught myself and said, “No, it’s important that if you’ve had lost opportunities, or you’ve made a mistake that’s resulted in a loss, you need to look for the lesson and move forward.”
Lesson #3: There Are No Shortcuts
The next thing I would recommend is to remind yourself that there are no shortcuts.
I have a dear friend who is very talented at what he does, and whenever I hear him talk about the things he is doing to increase his income, I listen to him talk about quick and dirty tactics to get traction.
When I was in my 20s, I did a lot of get-rich-quick, but I now recognise that you are much better off investing in a long game than looking for quick and dirty tactics to get you out of the gates.
We saw this happen most recently, with many people jumping into many of these tokens in the blockchain world.
I heard stories from people I know and people I don’t know, talking about how they lost their life savings over a weekend from trying to jump on something that was going to be 100x their money.
I really encourage you to avoid looking for shortcuts.
If you haven’t already, listen to my podcast on the three stages of wealth building.
There I discuss that you’ve got to build capital first, then focus on changing your income trajectory, and then you can build annuities.
There are no shortcuts to that.
Lesson #4: Have You Altered Your Investing Efforts Because Of the Past Setbacks?
The fourth point I want to make here is that it’s useful to ask yourself whether you have altered your investing efforts because of a past setback.
One of the things that makes me super sad is talking to people who have experienced some financial setback, which influences who they are, how they feel about themselves, and how they feel about investing.
They label themselves as not good at investing or resign from the opportunities they expect to uncover.
I’ve certainly had moments where I was also like that, but you must look for the opportunity where you had a setback.
Lesson #5: Decide If You Are A Passive Or Active Investor
The final point that I want to make is probably one that’s relevant to some of you.
When we’re just trying to establish ourselves as investors, we tend to take on slightly more hair-raising risks and push things to the limit.
But as we get older and wiser, and as we understand the lay of the land and how these investments work, we can start to decide whether we want to be active or passive investors.
When you’re young and just getting started, and if you want to be a passive investor from the get-go, you’re going to limit the number of opportunities you can access that could potentially build your capital.
This is because you have to do some work if you’re expecting above-average results.
But as you start to build a reasonable net worth and some capital behind you, you’ve got to look for investment opportunities where you can take more of a backseat in terms of active management.
Please listen to past episodes where I’ve talked exclusively about why I love alternative at that stage of the journey.
Final Thoughts
There are many reasons why some investors succeed while others get mediocre results.
It’s a complex chemistry of circumstance, luck, preparation, education, attitude, relationship with money, and other things.
I hope I have shown you a few things you can think about if you feel like you are not where you want to be and that you realise that there are a few things you can focus on to help get yourself moving in the right direction.
I’m a huge advocate of not comparing myself to others.
I was asked a question by one of my clients, saying, “Am I a small fry in the context of all your other clients?”
My immediate response was, “It doesn’t really matter. Whether your passive income goal is $80,000, $80 million, or anywhere in between, what matters is if your journey to that goal will give you the freedom to choose what you do with your life. That’s what we’re all about, right?”
If you’ve got any topics about wealth building you want me to unpack in the podcast, please contact me at salena@www.www.inkosiwealth.com.
If you’re a business owner feeling frustrated that despite doing everything right in the property investing playbook and you’re no closer to financial freedom, then head over to www.inkosiwealth.com to learn more about how you can use alternative investments to catapult your investing income and blend strategies to shave decades off your timeline to financial freedom.
If you’re interested in understanding how to create wealth through alternative strategies, please check out my programs, where I help you catapult your investment income and blend strategies to shave decades off your timeline to financial freedom.
Or, you’re welcome to get in touch today, book a call with me, and I would be happy to talk you through it – no obligation!
