Hi everyone! And welcome to another podcast, another video on this Wealthy and Wise Wednesday. Hope you’re doing great and ready to finish out the week strong.
So I’ve been thinking about this concept for quite some time, and the concept is basically, how we’re persuaded to invest and save by called traditional financial advisors. And as I thought about this and thought about this and thought about this, I came to the conclusion that one the best things I could do are have it drawn up in kind of a cartoon.
So I want you to see this cartoon. Obviously, if you’re on video, I’m going to be showing it to you here in just a second. But if you’re on the podcast, make sure you go to wisemoneytools.com/30 so you can see this cartoon. Although I’m going to do my best to kind of explain what’s going on here and the reasoning behind this. I think it would be great if you can take a look at it as well.
So here we have this cartoon picture and we’re downtown New York on Wall Street and we have you as the investor running down the middle of the street dodging all these cars and these cars are market crashes in inflation and interest rates, in risk, in fees, just to name some of the more obvious risks that we take when we’re investing in the traditional Wall Street fashion.
Others are income for life and where that’s going to come from, the sequence of return, deflation, I mean there’s a whole slew of cars that could be on this thing as well. And you kind of ask yourself, well, why is this guy or why am I running down the middle of Wall Street and dodging all these cars? That’s essentially depicting that we’re the ones taking the risk when our financial advisors push us toward investing in markets and speculation and all that stuff.
And, don’t get me wrong on this, because I am an investor. I like investments. I’m not opposed to investments in any way, shape or form. I’m kind of opposed to the traditional methods in which they’re purchased because it does, it just sends us into traffic right down the middle of Wall Street, dodging all these cars, hoping we’re going to be okay in the end. And you’ll notice at the end of the street, you’ll see this, the kind of a pot of gold is wealth.
Now, wealth is…it’s kind of an arbitrary word because it means different things to different people. So I kind of like to define wealth in one kind of succinct sentence. It’s hard to say. One succinct sentence and that is wealth gives you the ability to do what you want, when you want, without having to worry about running out of money. And again that number may be different for everybody who’s listening out there but that’s kind of the goal in life, to get to a point where we can sustain ourselves, where we can retire and be able to do what we want, when we want, and not have to worry about money.
And of course, we want money to last at least as long as we do. So that’s kind of the definition of wealth. So you got this guy running down the middle of Wall Street, dodging all the risks and things that we had to deal with as investors on their way to wealth. But what you might not notice right away is what’s going on, on the sidewalk.
You notice there are people on the sidewalk, out of traffic, and they too are making their way towards wealth. And some of these people that might be on the sidewalk are some of these great investors like Warren Buffett, Charlie Munger, Mohnish Pabrai, and Guy Spier, just to name a few. There’s plenty of them. Many of them like Carl Icahn and Ray Dalio. I mean, great investors.
But what they do is they are able to get their way to wealth and on the sidewalk, out of the traffic, out of harm’s way because of the way they do their investing. See, most of us are really just speculators. We don’t know why we invest in things. We don’t know the purpose, the rationale, and the supporting numbers. We tend to just take a financial advisor’s word for it and we jump in the middle of the traffic.
What’s interesting and the sequence or the sequel to this cartoon is the next one where you in the middle of the traffic are trying to get on the sidewalk. You notice that there’s a lot of people getting to wealth on the sidewalk. And so, you want to be on the sidewalk as well but every time you get close to the curb, your financial advisor who does the traditional style investing pushes your back in the middle of the street and says, “No. You’ll never get to wealth if you’re not dodging all this traffic.” And all you want to do is get out of traffic.
And so, what obviously this leads to is there are ways to get out the traffic. In fact, you know who else is on the sidewalk out of the traffic? Chances are it’s your financial advisor. Certainly, all the Wall Street Executives are walking on the sidewalk because you’re paying the fees so that they can walk on the sidewalk.
It’s interesting but there’s been a study on mutual fund managers. There’s not very many of them who actually put their own money in the fund that they’re managing. Now there’s been an argument that well, that’s because if they had their money in there, it would cause emotion and they might make decisions based on emotion. But the reality is it doesn’t matter. That’s a horrible rationale. If these money managers who are supposed to be so awesome especially in these mutual funds aren’t even managing their own money, they’re walking on the sidewalk so that you can keep paying your fees. You take all the risk. They have no risk if the market goes down and they can slowly and just methodically walk on the sidewalk towards wealth.
And so, we want to be on the sidewalk. That’s the easy way towards wealth and there are certainly ways to do that and it’s kind of the stuff that we’ve been teaching, that you keep your powder dry, that you keep your capital in a place where it’s accessible, that eventually, opportunities are going to come along where you can walk on the sidewalk and safely and predictably grow your money to even a greater extent on your way to wealth.
So if we start looking at the oncoming cars. But if we look at those oncoming cars and the different risks that we take, we’re at different stages in our lives. For instance, if we’re in our 20s and 30s, maybe market crashes aren’t going to be that impactful on this but they’re amazingly impactful. I mean, crush us, run us down. If we’re 5, maybe 8, 10 years away from retirement and a market crash occurs, we may never recover. I mean, even in this last so-called recovery, it’s been a great number of years. I mean, they’ve been fantastic, but it took about the first 7 or 8 of those years of recovery just to get some of these people back to where they were in 2008.
The one constant that kills us, that kills everybody is those darn fees. And I hope you’ve listened to my podcast and watch my videos on fees because that is the killer, that’s what keeps Wall Street execs on the sidewalk and you in the middle of the road right in the traffic. So as you near retirement, as you get to that 5, 7, 8, 10 years from retirement, this is when you want to start getting out of traffic and at least get on the sidewalk with some of your money so that it’s not at risk.
In the meantime, if you’re young and you’re growing, building wealth inside of a location or a vehicle where you don’t have to stay in the traffic, where you can keep the powder dry, where you can have access to it for opportunities, where you can stay on the sidewalk and then when those opportunities come along and like Warren Buffett says, when it starts raining gold, you can go out with a washtub instead of a thimble. When you can start buying $10 bills for $5, that’s when you want to get your money involved and have access to capital.
So I hope you take a good long look at this cartoon depiction. I think you’re going to find it interesting and there’s a lot of stories that can go behind that. But the main thing is that you don’t have to stay in the traffic. That’s where Wall Street want you, that’s where your financial advisors, for the most part, want you. And so, if you can find a way toward wealth on the sidewalk, you’ve got a much easier path to getting there.
So I hope this has been helpful. I hope it’s been kind of an eye-opening as well. And like I say, take a good long look at that and see where you fit and see what kind of risks might be coming your way. And then hopefully, we’ll have a sequel to this. And again, in terms of how the financial advisors just keep pushing you back into traffic when there comes a time when you just want to be out of the traffic. So, well, until next week. Take care.