Why Are Most People Bad at Investing?

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Most people want to be able to retire, and maybe even retire early. Part of planning for retirement involves learning how to invest your money, not just how to earn it. We spend years learning what we should do for work. We go to school, get a degree, or spend years learning a trade. Many people work very hard to earn an income, but most people spend very little time learning how to invest their money. Most of our lives involves preparation for joining the workforce. We are taught how to read, write, do math, learn history, and when we go to college, we learn even more about our major and how to make money. However, we are taught almost nothing about what to do with our money once we make it. How you save and invest your money is more important than how much money you actually make. If you want to retire early, you cannot simply work for 40 years, put away a little money in the stock market, and hope it grows enough over time. The reason most people are bad at investing is because they spend no time learning how to invest, how to save money to invest, or what the best thing to invest in is.

How are most of us taught to invest our money?

From an early age, we are taught that the best way to invest our money is to put it in the stock market. We are taught this from school, television, and our financial advisers. Here are the basics of investing in the stock market:

  • Set up and invest in tax-friendly retirement accounts.
  • Invest as much as you can into those accounts (if you are lucky, your employer will contribute as well).
  • Diversify your investments into stocks, bonds, and mutual funds.
  • The stock market should give you a return of 7% or so over time.
  • Thanks to compounding interest, that money should grow over time so that you can retire.
  • When you are ready to retire, you plan very carefully how much money you can spend and how long the money will last you.
  • Hopefully, nothing happens to that money in retirement or you don’t outlive your savings.

I do not like this retirement model because there are too many unknowns. Here are some issues I have with the traditional model:

  • We don’t really know what the stock market will do. It can go up or down, but it may take 20 years to see consistent returns.
  • The people who tell us to invest this way (our financial advisors) are often taking huge commissions off the top. We are not actually investing all of our money, and that is why we never seem to have as much money as we thought we would.
  • We have no control over stock-market returns. Really good companies could see huge drops in their stock prices because of the economy in France. We really have no idea about the companies we invest in.
  • We are competing with millions of other investors trying to make money the exact same way.
  • It can take decades to save enough money to retire if everything goes right.
  • If you live too long, you may eat through your retirement savings and have to go back to work.
  • If you need that money you have invested and it is in a retirement account, you will pay huge tax penalties to use it.

Most of us don’t know what we are doing when we invest in the stock market. We do a little research on stocks, or we listen to a financial adviser who is getting paid to steer us toward the highest cost funds. Many people have no idea what their investment account is actually costing them. There are many popular mutual funds that charge 3% load fees before any of your money is invested.

Why real estate is a better investment than the stock market.

Why is it that most people spend almost no time learning how to invest their money?

I think the reason most people are bad at investing their money is because they never took any time to learn how to invest. We spend most of our lives preparing to get a job or work for ourselves. We constantly work to make money every year by educating ourselves, switching jobs, or starting a business. But we are too busy with our jobs, our families, or our hobbies to spend any time learning how to invest. I love to invest in real estate, but there are many ways to invest your money and see huge returns. A lot of people do very well in the stock market because they spend years studying it and the best ways to make money in it. I have studied real estate for years and learned many awesome ways to make and invest money in that field. A business can even be a retirement vehicle if it is set up correctly as an asset that can be sold.

If more people took time to learn how to invest the money they work so hard to earn, a lot more people would be able to retire comfortably at a much earlier age. They also might have the time and the money to pursue more of their dreams because they have more financial stability.

How real estate allowed me to buy a Lamborghini.

What is the first step to being a good investor?

Many programs teach you how to invest in real estate with no money. There are get rich-quick-schemes all over the place, targeting people who have no savings and are looking for an easy and quick way out. The best way to get ahead in life by being a good investor is to have money to invest with. You must be able to save money so that you can invest it in something which can grow bigger. It is possible to make money in real estate and other businesses without any of your own money, but it is really hard, and if you have money to invest, it all becomes much easier. Saving money is not easy, and that is why most of the population has no savings. According to recent studies, only 15% of Americans have more than $10,000 saved. Most people have saved nothing in their lives. https://www.cnbc.com/2017/06/19/heres-how-many-americans-have-nothing-at-all-in-savings.html

Do not feel bad if you have no savings, as most people are in the same boat as you. That does not mean it is okay to do nothing about it and not change your financial stability.

How to save money.

How do you know what to invest in?

Most people do not spend any time researching the best way to invest their money. They do what their friends or family tell them to do. It usually does not matter how good of an investor your friends or family are, just as long as they tell you what to do. If someone else tells you how to invest, it takes the responsibility off you and saves you time learning how to do it yourself. This is why most people are bad investors! They listen to people who have no right to tell them how to invest, or they listen to insurance agents or financial advisers, who make money steering people into certain investments that are set up to make those people huge commissions.

I invest in real estate, and this blog is mostly about how to make money in real estate. I actually have no money at all in the stock market. However, while I think real estate is the best investment, it is not right for everyone. The stock market has made many people very rich. If you want to invest in the stock market, a franchise, or a friend’s business idea, at least take the time to learn about the investment and what you are getting yourself into. Do not blindly invest your money based on what you heard in a dinner conversation.

How much money can you make investing in rental properties?

Why do I think real estate is a great way to invest your money?

I love real estate for a number of reasons. I have made a lot of income from real estate through flipping houses, being an agent, and writing this blog. While income is nice, it does not make you rich. Many people make a lot of money and have absolutely nothing to show for it. The best thing about real estate is it provides passive income which comes in whether you are working or not. I use the income I make to buy as many rentals as I can. I have purchased 19 so far and would love to have 100. Here are some of the advantages of rental properties:

Because rentals can supply a consistent income every month, it is much easier to retire with them. Instead of saving up a huge sum of money you will slowly eat away at, you buy enough rentals to provide you the monthly income you want. Over time, rents will increase and loans will get paid off, which will increase the money you have in retirement.

Are stock market returns better than real estate returns?

 Conclusion

There are many ways to invest, but most people will never have much money to invest, and those that do have money may not take the time needed to invest it wisely. Take the time to learn how to invest so that you are doing something great with that money you worked so hard to earn.

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