I have a friend who is a cryptocurrency millionaire. Woohoo!
…But another friend has LOST thousands of dollars messing with crypto. ☹️
I know a couple who made more than $1 million dollars on GameStop stock. Crazy! 😳
…But I also know that many people LOST large chunks of money trading GameStop during the recent wallstreetbets fandango. ☹️
I know some extremely successful real estate investors. 🏠 💰 Cha-ching!
… And yet there are tons of people out there who suck at real estate and have lost a bunch of money. ☹️
Why is it that some people win and other people lose? If they’re all investing in the same types of assets, why are results drastically different?
I think it comes down to these 2 things…
- How people invest (the specific actions they do or don’t do)
- Why people invest (their motives — which guide the actions)
The WHY of Investing
I’m no Warren Buffett, but I’ve studied both successful and unsuccessful investors long enough to notice themes and trends.
Let’s start with a list of WHYs. These are the main reasons I believe successful and unsuccessful people invest:
My buddy John* is probably the worst investor in the world. (his words, not mine!). John tried to invest in cryptocurrency and failed miserably. He tried to buy a rental property — failed. He tried to start a business — lost his life savings. He even tried to invest in index funds (the most no-brainer way to grow wealth) and still somehow lost money doing it! 🤦♂️
From the outside, you might say that John just always has bad luck. But when you ask him WHY he chose his investments, he’ll reveal:
- He traded crypto because everyone else was doing it. He didn’t want to miss out on something skyrocketing.
- He tried house flipping because he thought he could make a quick $50k in 90 days. A TV show he watched made it look so easy…
- John’s business was built around the idea of “screwing over his old boss and workplace.” He wanted revenge.
- He lost money investing in index funds because he thought he could predict when the market was going up and when it was going down.
My theory about WHY is this: If you enter into an investment with corrupt motives, you are likely to fail. Instead, if you have pure intentions, your probability of success is much higher.
The HOW of Investing
The reason I listed the WHYs first is because intent influences actions. I can tell my buddy John about some good investment activities he should follow, but unless he corrects his ill intentions, there’s a high likelihood he’ll find a way to do the exact opposite.
Here’s the list of HOWs and specific actions that successful and unsuccessful people typically do:
I’ve done most of the bad investing things myself. It’s difficult to put emotions aside, think long-term, study your ass off, and follow the boring path.
But the older I get and the more I study successful people, the more I’m learning to stick with the good activities on the right side. It might be boring, but it increases my rate of winning.
Please also note that not everything in my list is so black and white! Everyone interprets these words differently — I only put them in 2 columns for simplicity. It’s not gospel.
Winning a Battle vs. Winning the War
You might be thinking, “Hang on a sec… I know someone who has horrible intentions and gambles constantly, and they are making a shit ton of money right now.”
Yep, there are always going to be exceptions to the rules. Sometimes people are going to be right for all the wrong reasons. But while they might win individual battles, they usually don’t have a consistent strategy to win a war.
Investing is a loooooooooooong game. Think infinitely.
Actually my “bad” investor friend John won a small battle recently. He invested in a meme stock and made 10x his money in just a couple days! I am truly stoked for him and his success. But, as you might have guessed, this win was negative reinforcement for John, so the gains disappeared shortly afterward with other similar risky trades.
Good Intentions + Good Actions = Success
Again, I’m not a genius investor or uber successful billionaire… so take everything I write with a grain of salt.
That said, if I could go back in time and give my younger self advice about how to be more successful at growing wealth, it would be this:
- Before investing, check your motives. Make sure your WHY is pure.
- Follow the proven path, even if it seems boring.
- Mistakes are OK!… Just learn from them.
- Think long-term. Play the infinite game!
- Stick to your own strategy no matter what everyone else is doing. “Just because everyone else around you is winning, it doesn’t mean you’re losing.”
Happy investing! Thanks for reading my dribble. Would love to hear your thoughts in the comments. :)
Joel is a 35 y/o Aussie living in Los Angeles and the guy behind 5amjoel.com. He loves waking up early, finding ways to be more efficient with time and money, and sharing what he learns with others. Rise Early | Retire Early!