Throughout my over 20-year Wall Street investing career, I’ve seen lot of smart people do plenty of dumb things…
Things like watching their neighbors make more money than they did in the markets … and then, to try to keep up with the Joneses, making “shoot for the moon” and "go for broke" investments.
Some of these investments were the investing equivalent of betting everything on red or black. Heads they win big, tails they lose everything. They became blind to risk and were betting on long shots.
And that’s not how to get rich. It's more like playing the lottery, and way less fun than Vegas where at least you KNOW you're going to lose everything you put down!
My feeling, based on my own experience, is that aiming for grandiosity is the fastest route to failure. People overestimate themselves and wind up with porfolios concentrated in speculative, overvalued assets which inevitably correct sharply, sometimes disastrously. Don't let overestimation get in the way of becoming fabulously rich, or at least successful enough that you can have your freedom, feed your family, travel, and enjoy other things in life that are important to you.
Warren Buffett compares taking these huge risks to make money to playing Russian roulette…
The reason is simple. Although the odds are way in your favor, the downside is fatal.
And get-rich-quick investors are doing something pretty close to that. They risk money they have and need on a long shot to make money they can’t afford to lose.
Seriously, on which planet does that make sense?
That’s why, when onboarding new clients at Maendel Wealth, my advice to these investors isn't always what they want to hear. But they need to hear it, and it's simple: Slow down…There are times in life to be a hero, and a trailblazer, and an innovator. Investing a career's worth of hard-earned savings is not one of them.
And by the way, the numbers for "getting rich slowly" can be pretty exciting. For instance, if you have a portfolio of only $10,000. Compounding at 12% per year, it would grow to more than $1 million over a typical working career of 40 years. A portfolio of $200,000, compounding at the same 12% per year … would grow to more than $1 million in just 15 years.
Successful investing is not a competitive sport. It's really about you versus your own primal and wrong-footed emotions, which is why we highly recommend working with a financial advisor who has additional certification as a BFA™ ( Behavioral Financial Advisor).
You can learn more here: What is a Behavioral Financial Advisor, BFA™ ?
Jim Maendel is a credentialed Behavioral Financial Advisor through Kaplan University, and believes that these tools and disciplines are critical to clients success as they help fill in the gaps in traditional financial planning advice.
- "Financial planning was a big advance 20 or 25 years ago. Behavioral financial advice is at least as big. It is that revolutionary". -Think2Perform Advisory Council