Where do you put your money? Do you invest in the stock market? In the latest Danger & Play Podcast, I explain how to invest like Aristotle and Wayne Gretzky.
Click play or check me out on iTunes.
Invest like Aristotle: Find the mean between two extremes.
“Cash is the worst investment class. Staying in cash is losing money. Suckers!”
Will investing in the stock market (or in property) make you illiquid?
Having your cash tied up in the market presents costs – the opportunity cost of missed deals.
If you have cash in market when “Shit happens,” will you be forced to sell at a loss?
They’ve been around forever. I’ve seen people predicting crashes forever.
Markets crash. That’s the nature of the business cycle. They always come back.
If they crash for good, I hope you have canned goods, guns, are physically fit, and have survival skill training.
Some unconventional investment tips.
Get a Costco membership. It costs $50. You will make a return of several-hundred percent on that $50.
Buy in bulk on Amazon. I buy these bulk jars of Spry gym. People laugh. I laugh all the way to the bank.
Amazon Pantry. There are these major price disparities on household goods available for Amazon Prime members. I buy massive containers of laundry detergent.
Mark Cuban agrees.
9) You have $100,000–where do you put it?
First I pay off all my credit card debt and evaluate paying off any other debt I have. What I have left I put in the bank.
Then I try to create as much transactional value as possible from that cash. I look at my annual budgets for everything and anything, and I look to see where I can save the most money on those items. Saving 30% to 50% buying in bulk–replenishable items from toothpaste to soup, or whatever I use a lot of–is the best guaranteed return on investment you can get anywhere. Then whatever I have left I keep in the bank and let it earn nothing. Why? Because then its available for when I get a good opportunity.
A Costco membership is a great investment, as Mr. Money Mustache shows.
Now you’re ready to invest in the stock market.
The first question to ask is, “What’s your edge?”
What do you know that no one else knows, or that only a select few know?
Before every buying a stock or investing in a property, that is always the question. This applies to stocks, bonds, small companies, and even real property.
Wall Street Playboys are on the other side of the trade. How are you going to take their money from them?
You saw an article on Seeking Alpha or in the news? That’s your edge – publicly available information that any idiot has access to? Is that a joke?
Your real estate agent “friend” says, “This is a great investment property!” Why won’t they buy it with you?
Next question: What is your investment goal?
If you’re young, you want to get rich. Right? Let’s be real.
Otherwise you wouldn’t be asking this question.
If you didn’t want to get rich investing in the stock market, you’d be doing what I do. I dollar cost average into SPY every month.
Is investing in the stock market going to make you rich?
I know. Everyone on the Internet is an amazing stock trader.
If they are so good, why aren’t they on Wall Street trading for a living?
They’ll show you one stock.
What about this one great stock tip? Hold or flip it? For how long?
Ask to see their entire portfolio.
Adjust for taxes and fees.
Measure their gains relative to benchmark.
How do you separate luck v. skill?
What about survivorship bias? In war, the man standing next to you dies. Did surviving a random attack show your skill, or did you get lucky?
There are thousands of new funds opened each year. After 5 years some will survive and some will die. Luck or skill?
Invest like Wayne Gretzky: Go to where the money is going, not to where the money has been.
“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” – Wayne Gretzky
Develop an expertise into your area. It could be fitness, brick laying, or nails. It really could be anything.
Invest your money by getting in the middle of a transaction.
Invest your money in a product. I remember when Blender bottles came out. I didn’t have the cash at the time. I thought, “Man, this company is going to be big.”
Same with Quest bars. They are huge now. I was eating them 2 years ago. (They didn’t need outside investors.)
My edge was expertise in the fitness market. I know what works and what doesn’t.
Invest your money in creating something. I am working on a nootropic.
My edge is in Danger & Play. I know where we are heading.
Find a way to invest in yourself. You are your best investment.
Develop genuine expertise and mastery in a subject area. Then capitalize on your inside information to make huge returns on your investment.