Feb 2, 2022
What’s the #1 thing successful investors are doing that average investors aren’t? What are some of the traps people typically fall into when it comes to investing that prevent them from achieving growth and freedom? Find out about what you can learn from Yale endowments, and what you should do to become a successful investor.
- ‘Nothing changes if nothing changes’ is one of the mantras around Brian’s house. It’s a reminder to not complain about an outcome or circumstance, but rather to try to find a solution.
- Typically, a simple mindset, behavioral or attitude shift, is all that’s needed to make the difference and get to a more favorable outcome.
- According to Brian, the truth is that the wealthiest investors in the world keep getting wealthier. This happens not because they're lucky or privileged, but because they're playing a different game than the average investor. They do not rely on 401k's average rates of return and stock performance to find security for themselves. The attitude wealthiest investors have toward money is completely different.
- The average investor is spinning their wheels, following the herd in their search for financial freedom and ultimately being discouraged with the results. These investors follow advice – such as funding their retirement accounts, accelerating the payoff on their home and storing money in the bank which will lead to security – that has proven to fall short of producing the results they were promised.
- A commitment of resources toward rapidly paying down debt often
leads to tunnel vision for the fact that the need for money never
stops: home repairs, college tuitions, etc., putting pressure on
your retirement and future goals. And while storing money in the
bank does promise security by giving you easy access to cash, it
only ends up proving to be a burden for the fact that nothing is
being done to grow your money for the future.
Yet, this is how the majority of people handle their money – an approach that leads them to a place of frustration, disappointment, and disillusion. - Another phenomenon that can be seen when it comes to investing is how average investors find themselves relying on and hoping for things outside of their control to bring them happiness and success. This is most evident when there are extremes happening in the market: when markets are good, greed sets in and there’s euphoria that spurs a belief in eagerness that more growth is coming. This is the equivalent of a gambler’s rush. On the other hand, when markets are bad, fear sets in and there’s anxiety, which spurs a belief that more losses will come. This is what Brian refers to as a ‘spectator’s approach to money’ – people are passively watching to see what happens next and are simply along for the ride with no control over the outcome.
- What creates wealth isn’t luck but the information and what you do with it. The wealthiest investors follow a system for creating income and achieve financial freedom.
- A look at Yale’s endowments shows you that the goal top investors pursue is to consistently produce income that is used to fund their school of operation. They strive for consistent growth with a focus on avoiding losses by using proven strategies to control the outcome.
- Despite this, the average investor typically allocates nearly 100% of their money to the stock market with no strategy, only hope. The average investor tends to focus on average rates of return, while wealthy investors focus on real rates of return. The wealthiest investors focus on consistency, over peaks and valleys.
- One of the key differences is that they focus on minimizing losses and controlling the outcome – this is a differentiating factor that prevents the average investor from experiencing the growth and freedom they’re seeking.
- Most successful investors have a broader range of products they use. They don’t use averages of past performances to dictate their choices per portfolio, rather they go for a portfolio diversification that goes beyond the stock market and includes alternative investments, annuities, life insurance, and so forth.
- It’s important to remember that security and success aren’t determined solely by how much money you have, but it’s a measurement of how much income is generated from the assets you have. The key here is consistent income.
- For the average investor, the mindset revolves around the growth of their money. The problem with this approach is that the idea of taking from your stack of money requires you to continuously replenish your stack in order to prevent it from running out. This approach leaves you needing to either work to earn money or live in the hope that the stock market will produce positive returns. Instead of spending a stack of $100 bills, you should focus on having those $100 bills create income to spend.
- Brian and his team have developed the Build Wealth System framework designed to help you build and protect your wealth. It can be broken down into 5 steps: clarity, identifying roadblocks, building a solid foundation, mirroring success, and mapping the progress.
- As an investor, you shouldn’t be greedy with unreasonable expectations (like the belief that markets produce real returns of 10% or more, while that figure is actually closer to 5%) but focus on what can be controlled. Strive to increase the income from your assets over rate of return.
- Brian and his team have found that 60% or more of the average person’s cash flow and assets are outside of their control. In your quest for financial independence, it’s essential to reduce dependency on banks and keep your money allocated in a way that enables you to control the outcome.
Mentioned in this Episode:
The Build Wealth System at brianskrobonja.com/consultation