Are You A Real Investor?
|February 19, 2010||Posted by Roshawn Watson under Uncategorized||
I was reading an article that challenged my notions about investing. It stipulated that most people are NOT real investors, even though many have retirement accounts (401Ks, IRAs, etc) because most of us are NOT professional investors. The distinction is elucidated when you look at amateur and professional golfers. Both types of players may be good at golf, but only the professionals are able to live off of the sport. They have hone their skill set and built their confidence in their abilities to the point where they can withstand the heat of competition and still generate income. In short, golf is their livelihood. Professional investors are the same: their investments are their livelihood.
If this economic downturn has taught us anything, it is we can not depend on others to fix our financial predicaments. When we relinquish control over our finances, there are foreclosures because we purchase homes that we cannot afford, there are Madoff-like scandals that wipe out all our investments because we didn’t know who we were investing with or trusted the wrong advice, there are medical bills that wipe out our anemic savings. One of my financial heroes recently shared how he loss over $30,000 in an oil investment because he didn’t bother to learn more about the investment. Recently, there have been some steps in the right directions because the decimated financial and real estate markets scared some sense into us. Although I celebrate our increased awareness and our increased savings rate, we must move from playing with our finances to becoming financial pros. One of the best ways to gain control of your finances is to become a professional investor.
Becoming A Real Investor
Investing for retirement with the traditional vehicles (401Ks and IRAs) are an okay place to start, but if your retirement plan is to solely depend on capital gains (i.e. stock, mutual fund, bond appreciation), then you may be gambling with your financial future. For example, consider what would have happened if you had planned on retiring at the end of 2008 when the economy dropped off a cliff. Fortunately, for all of us the stock market rallied in 2009 and some of the real estate markets recovered to an extent. I am also glad that that 60% of 401k accounts recovered as of December 2009 (per Vanguard). However, we all know that it could have taken longer or we could have been one of the 4 out of 10 whose portfolio is still depressed.
The key question is “where is the cash flow from your investments?”
If you have laid the groundwork to build a solid financial foundation, this is your call to action. Learn about investment vehicles today, and plan your next move now. Subscribe to investment magazines; join an investment forum; talk about your future with your partner. Learn to manage risks not avoid them altogether. Remember the biblical story about the 12 spies who were sent out to evaluate Canaan, the promise land. Ten of the spies came back with the evil report: we can’t take the land because of the giants. However, the remaining two (Caleb and Joshua) had the good report: it is a land that flows with milk and honey, and we are able to overcome the giants. If we’re willing to arm ourselves with knowledge about the risks and benefits of investing and with preparation, we will have the same confidence to become professional investors as Caleb and Joshua had to become giant-killers.
Don’t wait until you retire to start realizing a tangible return on your portfolio. The last thing you want is to become a pro at 65 (when you retire) and get caught with your “pants on the ground.” I don’t care whether you decide to own income properties or are a dividend investor, perhaps it is time that we all become income investors regardless of our other professions. In short, I’m on a journey to become a professional investor, and I hope you will join me.
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.