What is an investment?
I don’t know the dictionary definition, but to me, investing means …
… sacrificing something of value in the current moment in exchange for a asymmetric reward in the future.
But how do you do it? How do you go about making investments? Moreover, what are the investments you should be making?
In this article, I will teach you the 5 investments you need to be making. Also, I will tell you why these investments are so valuable.
Let’s get started.
#1 – Invest In Your Skills
There is nothing you can do that is more important than building your skillset.
When I think about my work and about the success I’ve had, it always comes back to my ability to produce real value. I know how to get things done. I know how to create a result.
In order to produce a result, you need to have the skills required to produce the result. It sounds obvious, but if it were so obvious, how come results are so hard to come by?
So many people fail to make the connection. I get messages every day from people who want advice on how to SEO their website or grow a popular newsletter.
No one ever likes it when I tell them to “become a great writer.” Most people are looking for a way to get the results without putting in the repetitions.
There’s no workaround for building a valuable skillset. Tools, hacks, and shortcuts won’t help you if you don’t practice. The secret to success in any endeavor is about one thing.
Our society is obsessed with scale. We want to create leverage and systems that increase productivity. But every system starts with the knowledge and the practical application of production. If you don’t know how to build a house, then developing a system to increase efficiency of home building is useless. Yet, so many people start at the point of leverage.
Invest in your skillset. Invest your time into becoming really freaking good at something. Until you have that, everything else is a complete waste of time.
#2 – Invest In Your
The other week, I wrote about the power of a personal brand.
My argument was that your brand is nothing other than your reputation. What do people say about you when you’re not around?
I heard a phrase that always stuck with me.
“It’s not about what you know., it’s not even about who you know. It’s about who knows you.”
Investing in your brand is the act of growing the amount of people who know who you are. If you do it right, your brand is the greatest asset you own, because your brand is an opportunity machine.
With a well established brand, the opportunities come to you. Suddenly, people want to do you favors and tell you about what they’re working on and ask for your involvement. Once you have a brand, everything gets easier.
Great, now you know the power of a brand. But that doesn’t help you get any closer to building one. What are the specific steps you can take?
This is the hardest step for most people, because most of you are more comfortable in the shadows.
It’s human nature, we have evolved to avoid the spotlight and to avoid being alone in nature. Before industrialism, being alone in the wild was a death sentence. Rejection meant being kicked out of the tribe and being kicked out of the tribe meant fending for yourself in the wilderness. But those rules don’t apply anymore.
Now, fading into nothingness is much more dangerous than rejection, even though it doesn’t feel that way.
You don’t have to be a master salesman to promote yourself. All you have to do is tell people what you’re working on.
Tell people about your projects, your ideas, your ambitions and how you can serve them.
Talk to anyone who will listen. Promote yourself with taste, poise, and generosity. But, promote yourself nonetheless.
A lot of gurus tell you to avoid coffee meetings and to protect your time.
Obviously, you don’t want to be taken advantage of and you should of course prioritize your time in the way that best serves you and your family. But aside from the obvious, I’ve never agreed with the notion of protecting your time.
I say yes to every podcast invitation, no matter how small the show is. I’m happy to meet people for coffee so they can “pick my brain.” I respond to as many DMs as possible and I try my best to reply to every authentic email I receive.
I’m happy to give back. It makes me feel good and it’s the right thing to do.
Also, investing in relationships is good business, because relationships scale. Every time you say yes to someone, you are increasing the likelihood that they say good things about you or tell their friends about how helpful you were.
I’ve seen many people spoil their reputations by becoming successful and forgetting where they came from. Saying yes to people will keep you grounded, will keep the good vibes flowing, and will keep you from tricking yourself into thinking that you created all your success on your own.
Plenty of people helped you along your journey, so do everyone a favor and say yes as much as possible.
brand reputation follows you everywhere you go. The bigger your brand, the greater your opportunities. Take it seriously and start now.
#3 – Invest In The S&P 500
Note* – I’m not an investment advisor and this is definitely not investment advice and if you invest money there is a possibility you could lose money.
When I was a kid, I was terrified of financial markets.
In truth, I didn’t even know what the stock market was until I was about 21 years old. After I read I Will Teach You To Be Rich, I started reading other finance books. These books helped me a lot.
Some other titles include …
- The Millionaire Next Door
- The Path
When learning about investing and markets, I started seeing the same patterns over and over again.
What I learned is that no one knows what they are doing. Literally no one.
Anyone who claims to be an expert in investing is lying to you. Being an expert in investing is like being an expert time travel. Anyone who is charging you money to “manage your investments” is completely ripping you off. Almost every fund manager, analyst, stock picker, and hedge fund manager either loses money, or breaks even. The ones that do well usually ride a good wave or haven’t been in the game long enough.
No one knows what they’re doing.
This life lesson had such an impact on me that it’s become an inside joke for my wife and I, and for my birthday she made me a sign for my office. It’s right in front of my computer. I’m looking at it right now.
So with that knowledge, how do you invest your money into the stock market so that you don’t lose your money and don’t get ripped off? After all, you want to invest your money somewhere … right?
The best thing you could do is invest in the market as a whole, because across time and in aggregate, the market always increases in value.
So instead of trying to pick the right stocks to invest in, simply invest in the S&P 500.
What Is The S&P 500?
To put simply, the S&P 500 is a fund.
A fund is a group of investment opportunities bundled together into a pot. So instead of investing in a single company, you can invest in the fund and get access to all the companies in the fund.
There are also different kinds of funds, but for the sake of this article, understand that the S&P 500 is an index fund.
An index means no one actively manages the fund. There are a set of requirements that determines which stocks and companies are allowed in the fund. In the case of the S&P 500, the requirement is simply that it is one of the biggest 500 companies in the United States.
Indexes have a cost advantage, because since no one managing the fund and making the subjective decision of what stocks to allow or not allow in the fund, you don’t have to pay fees for the “special skills” of a fund manager doing research and making decisions. As we discussed earlier, these skills are a waste of money because no one knows what stocks are worth investing in so you’re paying someone to do nothing. Worse, you’re paying them A LOT!
In the case of the S&P 500, the requirements are simple. The fund is comprised of the biggest 500 American companies. You don’t have to pay anyone to manage the fund, because the requirements are already determined. So you save enormous amounts of money on fees.
For that reason, investing in the S&P 500 is to invest in America. In this, the data is clear. The American economy is growing and there is every reason to think it will continue to grow.
Below is a chart that maps out of growth of the American stock market.
This is one of the most important pieces of information you will ever learn. This graph shows you that the American stock market, on average, and on a long enough timeline always grows.
You can see there are also plenty of financial crashes and bear markets. During these crashes, there is always fear and uncertainty, but the capital markets of The United States create the conditions for productivity and growth.
Invest in America, and you win.
Eliminate Your Stress With Automations
We’ve determined that “professional investors” are just as likely to fail as anyone else and we’ve also learned that the S&P 500 is the easiest and most historically reliable mechanism for financial growth.
Now we need to make this process as stress free as possible.
The best way to do this, is to automate your investing strategy so that you never have to think about it.
Because markets fluctuate. That is their nature. If you are trying to time when to put money into the market based on price, you will either second guess yourself or stress yourself out.
Investing shouldn’t be stressful. There should be no emotional highs or lows attached to it. It should be like watching paint dry.
So to invest successfully, the best choice you can make is to create an automatic investing strategy where you connect your bank account to your investing account (I use Vanguard) and then send money into the S&P 500 without thinking about it.
I automatically invest $500 every Friday into the S&P 500. I hardly ever look at it and I don’t think about whether it’s up or down. Rather, I know that if the market is low I am buying my investment at a lower price and if the market is high I am seeing returns on the investments I made in the past.
#4 – Invest In Real Estate
Real estate is unique in two ways …
- It’s finite
- It’s always in demand
The real estate markets may rise and fall, but the need for real estate will never go away. People need a place to live, and they always will.
Now look, I am not a high level real estate investor and I have no plans of becoming one. I find real estate to be extremally boring, over saturated, pretentious, and full of dorks trying to sell you courses on becoming a real estate millionaire.
Real estate isn’t a good way to make money. Rather, real estate is a good way to generate wealth.
What do I mean by that?
The Way It Works
In 2018, I bought a house in Nashville. I put a 20% deposit down on the house. We lived there for 4 years, and paid the mortgage every month.
Now I live in Denver. Currently, I have a tenant in the Nashville house and a property management company that handles everything. Every month, I make a few hundreds bucks in income.
But who cares about the income? What I am (and what you should be) interested in is the equity.
Every month, someone is paying the mortgage for me. In turn, the value of the property continues to grow which means the house will be worth even more money in the future.
Now, if you do it right, you can save the profits generated by the cashflow from your property and buy a second mortgage and get a second property.
Over the course of a lifetime, you could end up with multiple properties that all generate income and all increase in value over time.
Someone is literally paying for your assets. You are getting paid to get rich.
In this method, the value of your money grows in relation to the value of your property. So you are taking cash and simply turning it into real estate. Then the value of the real estate grows, which means the cash you generate in the future grows as well.
Don’t over complicate it. Don’t try to become a real estate billionaire. Rather, think of real estate as a way of getting other people to spend their money to invest in your wealth.
Sounds good to me.
#5 – Invest In Your Health
I know what you’re thinking.
“Oh … you want me to invest in my health? Really? So typical. I thought you were going to give me good financial investments instead of saying the same thing that all the macho bros on Twitter say.”
I am giving you financial investing advice. And you should be thanking me. You’re welcome.
Because your health is the best financial investment you can make.
Aside from loss of income, medical expenses are the most common cause of bankruptcy in the U.S.
It absolutely blows my mind when I think about how much money people waste on their health. If you think buying quality food is expensive, just wait until you get the medical bills from the side effects of unhealthy food.
Either way, you’re paying for your health. You might as well pay the bill that keeps you vibrant, healthy, attractive, productive, and youthful. And in the long run, medical bills are an order of magnitude more expensive than good health in the first place.
Yes, there are many flaws in the American health care system, you won’t here me defending insurance companies any time soon. However, the vast majority of health problems in our country are from diabetes, heart failure, obesity, and hypertension. If all of us took our health seriously, then we would have leverage over insurance companies because then they would be competing for our business. Instead, most people have to take whatever health policy they can get because they have no bargaining power on price. Healthcare companies should be competing for us, not the other way around.
This absolutely baffles me. Out of all the stupid things Americans do, this one is by far the stupidest.
You’re paying money to destroy your health and then complaining about preventable healthcare costs.
If You Don’t Have Your Health, Then What Do You Have?
A healthy person wants everything.
A sick person only wants one thing.
Think of that last time you were sick. Maybe you had a fever and you were puking next to your bed. Think of the sweats you had and the absolute feeling of dread. In those moments, you’re not thinking of anything except feeling better.
All you want is to eat a good meal and enjoy some sunshine.
Through that example alone, it’s obvious that your health is the single most important indication of the quality of your life? But most people treat their health as though it’s something you can buy back later.
You sacrifice your health for money and then you try to sacrifice your money for your health.
“Next month, I’m getting in shape.” That’s what most people say. It’s so stupid.
Why? Why not just invest in your health from the beginning? It’s cheaper, you’ll feel better, and guess what? … you’ll be healthy.
Your Health Pays Dividends
Your health has a compounding benefit, because as you get older the people you are competing against get older too.
Most people rapidly lose their health as they age. They gain weight, they lose bone density, muscle mass and destroy their gut biome.
But if you are one of the few who invest in your health, you will continue to be healthy and improve your performance, while the rest of the world is falling behind.
The reverse correlation between the two creates a widening gap between you and everyone else. It looks like this ….
There is no good reason to ignore your health.
I can not understand how most people live that way.
Invest Your Way To Wealth
There is a difference between being rich and being wealthy.
Being rich is a numbers game. Rich people have a lot of money.
Being wealthy is a systems game. Wealthy people have created a mechanism of habits and systems that rachet up the growth they want to see in their lives.
This means that their efforts aren’t directly connected to the results. They don’t have to work harder in order to make more. In fact, it’s usually the opposite. In time, the wealthy end up working less and making more, because the systems they have built continue to generate profits which is reinvested and makes more profits.
Wealth is a system. Like any system, it requires investment.
Invest in yourself, invest in the system, and build your wealth.