Investing isn’t supposed to be exciting. It’s exciting to go to the racetrack, put down some money on a horse, and win big on a long shot. Coming home from the track with a couple thousand in your pocket has to be a good feeling. Not that I would know because I’ve never won more than 60 or 70 dollars—but a few thousand has to feel great!
It’s equally exciting to go to Vegas and win a bunch of money on the roulette table. Come to Vegas with 500 dollars in your pocket to gamble and leave with a few thousand—that has to feel great too. Just like with the racetrack, that’s not a feeling I’ve had, but I’m sure it’s a great one.
These are both examples of gambling, or speculating. A high risk place for your money where the odds are with the house. Odds are that gamblers will lose. The appeal of course is that when the gambler wins, he or she can often win big. I’m sure we’ve all heard stories from friends about how they won on a 40-1 horse or landed on their number on the roulette table.
Bets like this are all very exciting of course. A one hundred dollar bet with the chance to win thousands is enough excitement to get the attention of most people.
Investing Isn’t Exciting or Gambling
Not to be a buzzkill, but let’s come up with another scenario. A kind of boring scenario to be brutally honest. A real estate investor owns three properties. The first property cash flows 250 dollars per month, the second one 200 hundred dollars per month, and the third 150 dollars per month. All totaled, 600 dollars per month in cash flow. For the year, that’s 7,200 dollars in cash flow.
All the tenants have lived in the units two years or more, pay on time, and have a good relationship with the landlord. Rents are average for the area and both tenants and landlord are happy with the current situation. That’s it, end of story.
Not very exiting is it? Hey, I told you it was going to be a boring story…
As unexciting as it is, this story is the story of how people accumulate long term wealth. It’s a story of smart investing, putting systems into place, and creating positive relationships with tenants. No frills, no excitement, just consistent monthly income from a smart investment.
Another Example
Since that story wasn’t the most exciting, let’s come up with one more. I can’t promise this one will be exciting either but let’s give it a shot. A 22-year old fresh out of college decides she is going to invest 20 percent of her income every year. Her starting salary is 50,000 dollars per year and she steadily makes more every year.
By the time she is 45 years old, she has over two million dollars and is making a very healthy salary. She intentionally has a simple lifestyle and is very content with her current situation. She is financially independent and can stop working whenever she likes. She continues to work because she likes what she does.
That’s it, end of that story. No big ups and downs, no high risk speculation where she doubled her money in one day. Just consistent investing and eventually financial independence.
Vegas Is Lavish For A Reason
There’s a reason Las Vegas is so lavish, the hotels so big, the wealth so opulent. It’s because of the gamblers. Every year people come to Las Vegas and gamble their money in hopes of quick riches. Some win, but the majority don’t. It’s the majority who pay for the opulence.
The winners tell their friends, buy drinks and dinner, and have a great night. Some winners even get a picture of themselves in the casino with the jackpot they hit. If “Average Joe” won $36,500 in one night, anyone can do it right?
To be honest, I don’t think there is anything wrong with this as long as people see gambling for what it’s supposed to be—entertainment. It’s not investing or a way to earn riches. Gambling is really exciting because it’s entertainment, and entertainment is supposed to be exciting and fun.
Exciting Versus Immediately Exciting
Investing can be exciting, just not immediately exciting. It’s exciting to achieve financial independence after years of investing in the stock market. It’s also exciting to buy rental properties and achieve financial independence quicker than 95 percent of the population. Those things are all structured, systematized, and planned.
Immediately exciting is purchasing a volatile stock or high-risk real estate deal, which is more speculation than investing. There are people able to do this but what we don’t see behind the scenes are the years of research and practice these people have to get to the point where they can make high risk deals. With that probably came a lot of losses and learning over the years as well.
The average person engaging in high-risk deals with the potential for 200 percent returns in less than a year is speculation. It may work now and then, but for the most part, it doesn’t. It’s really exciting when it does work, not so exciting when it doesn’t.
Investing on the other hand almost always results in a financial victory. As long as someone is willing to hold the investment for years at a time, they are likely to win based on historical patterns. Someone who purchased index funds in 1995 probably has a lot more money today than they did when they first began investing.
Someone who bought two rental properties in 1995 also probably has a lot more money than they did when they first purchased the properties. For both investments, we’re talking a 25-year time period. That’s a long time, and hardly get rich quick. Exciting now that they have the financial victory, but not that exciting day to day.
Last Thoughts
Gambling and speculation is fun, but it’s not investing. I’ve always advocated for people to invest at least 10 percent of their income, and that hasn’t changed for me over the years. Investing 10 percent of more of your income is the foundation for a successful financial future.
Whatever people do with their money after investing at least 20 percent is a personal choice. Some may seek excitement by buying a new car, going on vacation, or taking a weekend trip. Others may seek to make investing exciting by speculating in a high-risk stock.
There are many ways to get immediate excitement in your life. Investing rarely is going to be one of those ways.
Do you consider investing immediately exciting or are you more focused on the long-term rewards?
